State Budget

Revenue from the state government’s three largest taxes beat budget projections by $3 billion (21 percent) for the month of December, the Legislative Analyst’s Office (LAO) reported January 20. The projections for the personal income tax, corporation tax and sales tax were included in the 2020-21 budget approved by the Legislature and governor in June.  “Collections beat expectations across all components of the three taxes, with income tax withholding being the single largest contributor to higher-than-expected collections,” the LAO staff…

Governor Gavin Newsom this morning unveiled a $227.2 billion state budget proposal – roughly $25 billion higher than the budget enacted last summer – that continues the business tax increases approved in last year’s budget. The Department of Finance acknowledged revenue forecast mistakes in the 2020-21 budget, with the director of the department telling reporters: “We got it wrong.” Last year’s AB 85 (Assembly Budget Committee), which the department said was critical to closing a budget shortfall that is now…

State Auditor Elaine Howle reported August 25 that her office has designated the state’s management of federal funds related to COVID-19 as a high-risk statewide issue. Congress enacted legislation in March and April that included funding for states to help mitigate the effects of COVID-19. The auditor reviewed information about this funding that California departments received, or expect to receive, and made the “high-risk” determination “based on our evaluation of several factors including, but not limited to, the following: The…

Governor Gavin Newsom and Democratic legislative leaders announced June 22 that they reached an agreement on the 2020-21 state budget, and three days later the Senate voted to approve 18 budget trailer bills to implement the deal. The Senate’s approval of AB 89 (Ting), “the budget bill junior,” came Thursday evening with a party-line 29-11 vote. The budget passed June 15 by the Legislature (SB 74) relied heavily upon possible receipt of federal funds to balance the budget. The new budget agreement…

Both houses of the Legislature are scheduled to vote Monday on a budget deal that includes $9.2 billion in tax increases on California businesses via a suspension of the net operating loss deduction and a $5 million-per-year limit on business tax credits – including the research-and-development credit – for three years retroactive to the beginning of this year. CalTax is leading a coalition of more than 50 trade associations and local taxpayer groups in opposition to the tax increases, which…

Democrats in the state Senate released a budget proposal this week that agrees with Governor Gavin Newsom’s proposed limit on tax credit utilization and suspension of net operating loss deductions, but rejects some of the governor’s proposed spending reductions and focuses on using reserves and deferrals to balance the 2020-21 budget. A significant tax change previously suggested by Senate leaders – discounted income taxes for those who prepay a year or more in advance – is not part of the…

The Legislature’s budget deliberations kicked into high gear this week with committee hearings on Governor Gavin Newsom’s budget revision. The governor’s budget plan includes $9.2 billion in tax increases on California employers, to be imposed by suspending net operating loss provisions and capping the amount of tax credits a business could claim during three tax years. These provisions were discussed in the committees, but not brought to a vote. Assembly Speaker Anthony Rendon truncated the budget process in his house…

Governor Gavin Newsom released his revised budget proposal May 14, a $203.3 billion spending plan for the 2020-21 fiscal year that calls for higher taxes on California businesses via suspending net operating loss provisions and capping the amount of tax credits a business can claim. Newsom proposed the NOL suspension for 2020, 2021, and 2022 for what his budget summary describes as “medium and large businesses,” without additional details. The revised budget also would limit business incentive tax credits from…

The state government could increase funding for K-12 education by properly managing the California Lottery, which owes schools $36 million, the state auditor reported February 25. The auditor originally calculated that the Lottery shortchanged schools by $69 million, but reduced the figure after Lottery officials belatedly provided more documentation. “We shared our calculation with the Lottery of how we arrived at the $69 million that it owed to education several times before it received our draft report,” the auditor wrote.…

Governor Gavin Newsom on January 10 unveiled a $222.2 billion state budget proposal, reflecting a $7.4 billion increase in total spending (general fund and special funds) over the budget enacted in June. The governor said the budget has an operating surplus of $5.6 billion. At a press conference, Newsom touted the “highest level of investment ever” in public education – $84 billion, which represents a 3 percent increase over the current fiscal year, which also represented a record high. The governor’s…