Did 'fiscal cliff' fears wipe out California's red ink?
It was only a few months ago that the Legislature’s analysts declared that California still had some red ink to contend with, projecting that the governor and lawmakers would have to close a $1.9-billion shortfall.
In the budget Gov. Jerry Brown presented Thursday, he declared that shortfall was gone. He said even if the state made no program cuts or other policy changes, California’s budget would be balanced next year. He proposed plans that would allow the state to build a $1-billion surplus.
So how did the state go from $1.9 billion in the red to the black so quickly?
Brown’s budget explains that most of it is the result of a projected surge in personal income taxes. As wealthy Californians prepared for the pending federal tax hikes, many apparently began rushing to cash out stocks and other investments in the 2012 tax year, so they wouldn’t have to pay the higher rates that took effect in 2013.
The administration explains -- albeit in dry language -- on Page 137 of the governor’s budget: “The [revenue] forecast includes a shift of capital gains, dividends, and wages from 2013 into 2012 as a result of the expected increase in federal tax rates.”
But the administration also warns that lots of guesswork went into its forecast, which was completed before the nation went over the "fiscal cliff" and a tax deal was reached in Congress. It still has not seen the actual returns from the last quarter of 2012, and cautions that the state will be unlikely to confirm whether that surge in revenue actually happened until the governor releases a revised budget plan in May.
-- Evan Halper in Sacramento
Photo: California Governor Jerry Brown on Tuesday at a news conference in Los Angeles. Credit: Robert Gauthier/Los Angeles Times