Friday, January 09, 2009

The (Budget) Truth Is Worse Than You Can Possibly Imagine

While the Governator and the Legislature fiddle, Rome continues to burn. Here's the latest from the Controller's office (pdf warning):

- December 2008 revenue was $1.15 billion (-12.7%) below estimate
- December 2008 revenue was $384 million (-4.6%) below December 2007 revenue
- Year-to-date revenue (July-December 2008) was $2.4 billion (-5.7%) below estimate
- Year-to-date revenue was $1.9 billion (-4.5%) below July-December 2007
- The state has $3.2 billion in "borrowable resources" remaining
- December 2008 general fund revenue was $8.65 billion
- December 2008 general fund spending was $9.07 billion

Two facts:

1. The 2008-2009 revenue estimate was for an increase over 2007-2008 revenue.
2. The decline accelerated rapidly in December.

One conclusion:

At this rate of decline, and that level of denial, any budget "solution" enacted in the next couple of weeks will not solve the crisis. We're going to be stuck here for quite a while.

6 comments :

patient renter said...

The 2008-2009 revenue estimate was for an increase over 2007-2008 revenue.

I wasn't aware of that. My only thought is, you have got to be kidding! This projection defies common sense!

Max said...

Yeah, the projections were wildly optimistic, and were derided in the press the moment they were released.

The shocker is the speed of the decline in December. Almost half of the actual cumulative y-o-y decline happened last month! Apparently, sales tax revenue for smaller businesses lags by a month or so, so there might be a xmas bump in January, but the payroll and business income tax declines were monsters.

Rob Dawg said...

Two of the reasons for assuming an increase 08-09 was Prop 13 stabilization that would generate the usual 2% increase for 90% of the real property stock and a drastically decrease in the usual increase in the less than 10% that transacted recently. The downturn is crushing every 2001 on assumed valuation. The second was an estimate of final disposition. Taxable one time events; stocks, real estate, etc. That's gone, not just down, essentially gone. No more paper millionaires turning into taxable millionaires.

And it is only scratching the surface. Sales Taxes are next. All those illegals aren't consuming for but one thing.

Anonymous said...

On the contrary, I would think the State of CA could easily figure out how to exist on 4.6% less revenue than the prior year.

Most of the rest of us (the real world) are trying to figure out double didget decreases vs previous years.

Stupid that they budgeted for an increase, but that was a dream.

Anonymous said...

Sippn

Max said...

On the contrary, I would think the State of CA could easily figure out how to exist on 4.6% less revenue than the prior year.

Yeah, but it's going to be worse than 4.6%. December's y-o-y decline was 20% of the total y-o-y decline. I should post a graph of this...

BTW, in my last comment I meant to say "Almost half of the actual cumulative y-o-y decline in estimated revenue."