The state's expected revenue from personal income taxes fell about $3 billion short of expectations in April, prompting concern about further state cuts as the governor prepares to submit a revised budget to the Legislature.
When Gov. Arnold Schwarzenegger submitted his 2010-11 fiscal-year budget in January, state finance officials estimated that personal income tax revenue would be about $10.5 billion in April.
Instead, actual revenue came in at $7.4 billion, said H.D. Palmer, deputy director of external affairs for the state's Department of Finance.
In a state facing a nearly $20-billion budget deficit, April is a critical month for the state's finances, State Controller John Chiang said.
In the last fiscal year, personal income taxes made up 51.3 percent of all state general fund revenues, according to Chiang's office. Of that revenue, nearly 17 percent arrived in April.
"It highlights the fact that the governor and Legislature need to get to work and get a budget in place as quickly as possible that has strong, tough solutions to what the state currently faces," Chiang said.
What it faces is billions in deficits that Schwarzenegger will seek to fill in his revised budget due on May 14. But filling them could mean difficult choices on a range of state-funded programs, and that had some observers skeptical if not indignant.
"It's hogwash," said Mark Skvarna, superintendent of the Baldwin Park Unified
He noted that the general tax revenues have actually increased so far this year - until April.
Overshooting on estimates of state income tax revenue was just a prelude to announcing more cuts, said Skvarna, who vehemently defended education funding.
"We all knew it was pie in the sky," he said of the governor's original projections. "I've got news for you. I've got nowhere else to cut. I'm not going to play into it. It's that simple."
Jeff Collier, Whittier's community development director, wasn't surprised at the news that revenue was falling short.
He referred to the administration's efforts to fill the budget gap as "smoke and mirrors."
"They got real creative," he said of state officials.
But in this economy, it's not easy to make accurate projections for income, said State Sen. Bob Huff, R-Walnut.
"In a recession as deep as this was, it's a hard thing to quantify," Huff said.
State finance officials said they were still analyzing the numbers, and looking at why the real numbers didn't hit those forecasted.
Palmer pointed to a variety of possible factors, including lower business revenues, the timing of tax laws and losses from capital gains.
The capital gains issue would make sense, according to Nancy Sidhu, chief economist for the Los Angeles County Economic Development Corp.
If you lost money on the stock market early last year, those losses would be reflected on your 2009 returns, she said.
"In April, everybody has to come to the truth of what they were doing in terms of buying and selling securities," Sidhu said.
The state is now feeling that truth.
Despite the fact that general fund revenue was up by $2.7 billion above forecasts from January to March, officials said, a massive deficit remains, and lower-than-expected income tax revenue won't help.
"Now, (Schwarzenegger) has got to find a way around it," Sidhu said. "The choices are not pleasant. It means either revenues have to go up or spending has to come down. Those are not happy choices."
So far, the Legislature has shaved about $1.4 billion off the state's budget deficit, which the Legislative Analyst's Office says tops $20 billion.
Officials from Chiang to the finance department were looking for more gaps to be filled - and soon.
"This is a situation where time is money," Palmer said.
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