August 9, 2011

State Budget Trigger Watch

The State Controller has released the July 2011 General Fund revenue for cash receipts.

The Department of Finance will release its report within two weeks. While there are differences in how the two agencies report General Fund revenues, there usually is little significant difference.

The 2011-12 adopted State Budget assumed $4 billion in General Fund revenue greater than the May Revision estimates. Because the assumption was potentially optimistic, the State Budget agreement also included trigger language for funding cuts if General Fund revenues are estimated to be less than the $4 billion amount assumed in the final adopted State Budget. For K-12 schools there would not be any mid-year cuts as long as the estimated state General Fund revenue is within $2 billion of the adopted State Budget estimate. K-12 cuts could occur, however, if the estimated revenues are greater than $2 billion less than the adopted State Budget General Fund revenue estimates.

The Controller’s report for July 2011 identifies state General Fund revenue to be $538.8 million below the adopted State Budget estimate. Before you jump to the conclusion (or jump out the window) that the trigger will be pulled for K-12 cuts, there is a “glass half-full” way of interpreting the Controller’s report.

The big three tax revenues (personal income tax, sales and use tax and corporate income tax) were only $120 million below estimates. Almost all of the difference ($418 million) was from “other” revenues which is a volatile revenue source that has fluctuations due to timing of receipt rather than the probability of actual receipt.

While the numbers look really bad, they might be only a little bad.

~Dave Walrath