California May Revenue Tops Forecast by $592 Million

California’s revenue in May exceeded Governor Arnold Schwarzenegger’s estimate by $592 million, or 9.8 percent, according to state Controller John Chiang.

Personal-income taxes contributed to most of the increase, beating forecasts by about $392 million, Chiang said today in a statement. Compared with May 2009, receipts rose 25 percent.

“May revenues may have been positive, but their small climb represents only 3 percent of the state’s budget deficit,” Chiang said in the statement. “The financial problems before the Legislature and governor remain just as daunting and time- sensitive as they did a month ago.”

The nation’s largest state by population started the fiscal year on July 1 with an $11.9 billion cash deficit. That rose to $18.6 billion by the end of last month, the controller’s figures show. The shortage is being covered by a combination of borrowing $12 billion from special state funds and $6 billion from external sources, Chiang’s statement said.

California’s constitution requires lawmakers to send a budget to the governor by June 15, a deadline they’ve met only five times in the last 30 years. The budget for fiscal 2008 was enacted 85 days into the year, the latest ever. A conference committee of legislators from the Assembly and Senate is working to draft a spending plan. The panel hasn’t reached a consensus on how to erase the deficit.

Democrat Plans

Democrats in the Assembly want to borrow $9 billion backed by beverage-container recycling fees and a new levy on oil production. Their counterparts in the Senate want to raise as much as $5 billion by extending temporary income-tax and vehicle-license fee increases, passed last year. They also have proposed raising levies on alcohol and delaying scheduled corporate tax cuts for two years.

Schwarzenegger and his fellow Republicans want to slash government spending instead. They have said they will block tax increases. While Democrats control both chambers, they lack enough votes to pass budgets by the required two-thirds majority.

State spending was running about $1.16 billon behind estimates through last month, the controller’s report said. That included $565.5 million less for public grade schools and $417 million below projections for local medical assistance.

California’s economy is showing signs of life. The state’s merchandise exports jumped 21.8 percent in April from the same month last year, to $11.26 billion, according to an analysis by San Rafael, California-based research firm Beacon Economics. That was the sixth consecutive month of year-over-year increases, according to Beacon, which based its analysis on trade data released today by the U.S. Commerce Department.

“Things are looking up for sure,” said Christopher Thornberg, a Beacon principal. “Are we entirely out of the woods? Not yet.”

To contact the reporters on this story: Christopher Palmeri in Los Angeles at; Michael B. Marois in Sacramento, California, at

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