Smiling Faces at the Franchise Tax Board

Income tax collections for April nearly doubled on April 16 as the Franchise Tax Board logged $950,762 boosting the month’s tally from $1.3 billion to close to $2.3 billion.  

As the state’s largest month for income tax revenue, April is key to the state’s fiscal condition. Lower-than-anticipated collections mean a bigger budget cash shortfall. Better-than-expected revenue lessens that shortfall.

Higher than expected tax collections could also aid the state in finding buyers for the record amount of Revenue Anticipation Notes it must sell in June to smooth over its cash flow peaks and troughs. Buyers have been reluctant because of the state’s abysmal fiscal condition. So grave is the fiscal situation that State Treasurer Bill Lockyer has sought federal backing of the notes to entice potential buyers. 

The budget enacted February 20, designed to close a $42 billion gap between revenue and spending commitments, is already estimated by the Legislative Analyst to be $8 billion in the red.

That hole could grow by $5.8 billion if voters don’t approve several measures on the May 19 special election ballot. And increase further if April income tax collections fall below expected levels.

Gov. Schwarzenegger’s Department of Finance predicts April income tax receipts of $8.9 billion – well below the $12.8 billion collected in April 2008.

The final two weeks of the month after the April 15 filing deadline yield far heftier sized collections than the first two weeks, as evidenced by the April 16 tally.

Doing the math: Within 14 days, the $2.3 billion on hand must grow by $6.6 billion to meet the projections in the budget.

Stay tuned.

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