California Money

Capitol Alert
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By Jim Miller
04/25/2015 – 11:17 AM

California income tax collections in April have already exceeded the Brown administration’s January estimates, underscoring the surge of higher-than-expected money flowing into the state treasury and possibly offering health and welfare programs – not just schools – a piece of the windfall.

For months, it has been assumed that K-12 classrooms and community colleges had a virtual lock on nearly all of the extra tax revenue, thanks to the state’s school funding law. In fact, under some recent budget scenarios, the state faced the prospect of cutting non-school spending in the fiscal year that begins July 1 to provide schools with the money owed under the law.

But income tax revenue for the current fiscal year has continued to grow well beyond expectations. By June 30, state revenue could exceed January estimates by more than $4 billion, the Legislature’s nonpartisan fiscal analyst reported this week. If it exceeds $4.4 billion, health and welfare programs could benefit from the surge, following months of calls that California needs to do more to reduce poverty and income inequality in the state.

“The April revenues by and large have been so strong that they might cause the state to have an even stronger revenue year than the optimistic scenario we’ve already had,” Jason Sisney of the Legislative Analyst’s Office said Friday. The LAO’s report said the surge could make “additional resources available for budgetary priorities like larger reserves, larger debt payments, or changes in state spending programs.”

Sisney stressed that the state’s budget outlook will become clearer after Gov. Jerry Brown releases his revised budget plan next month. In particular, Sisney said, the revision will show the administration’s latest approach to carrying out the rainy-day reserve and debt-repayment plan approved by voters last November.

There are two main reasons why schools and community colleges have had such a strong claim on the additional state revenue. Schools are in line for 40 percent of general fund revenue under this year’s interpretation of the school-funding formula. Also, the state has to pay up on recession-era budget obligations to schools.

“It’s not like we’re rolling in dough,” said Dennis Meyers of the California School Boards Association, adding that school funding remains below pre-recession levels.

Kevin Gordon, a lobbyist for school districts around the state, said school interests sense that non-school groups also have designs on the money.

“We’re the first to get run over by a truck when budgets are bad,” he said. “And when there might be extra money, people are figuring out how to prevent schools from getting all that they should be getting.”

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