CONTROLLER CHIANG RELEASES YEAR-END CASH REPORT

On Friday, July 9, State Controller John Chiang released his final report on state receipts and disbursements for the 2009-10 fiscal year. The numbers show how much cash moves in and out of the state’s General Fund each month, and compares it to budget estimates. In June, cash receipts were about 0.5 percent lower than the 2010 May Revise predicted.

Since the Governor’s office calculated the 2010 May Revise estimates, the budget picture has brightened slightly. In those two intervening months, receipts have come in $417 million above expected levels, and disbursements have gone out $1.36 billion below expectation, so the state is in $1.777 billion less trouble than previously thought. Certainly any good news is welcome, but some back-of-the-envelope arithmetic shows that an expected deficit of about $17.3 billion remains.
(See Chart of Receipts and Disbursements below)

A Look Back

The report gives an opportunity to easily compare recent fiscal years. General Fund cash receipts were 1.0% higher in 2009-10 than in 2008-09; the modest increase is due to the tax increases, but is better news than the severe decline of over 15% the previous year. General Fund cash disbursements, on the other hand, were 11.77% lower than in the previous fiscal year and, more importantly, 2.24% ($1.99 billion) lower than cash receipts.

This marks the first time since the 2005-06 fiscal year that the state’s General Fund has, on a cash basis, paid out less than it received. In the three intervening years, the state disbursed a total of $21.1 billion more than its receipts. This year’s relative success at balance is partly thanks to the revenues redirected from redevelopment agencies and county offices of education, which paid for some programs that the General Fund otherwise would have.
(See graph of Reimbursements 2008-2010 below)

Revenues

Revenues make up the vast majority of all receipts, in 2009-10 about 97.7% (the other 2.3% is “non-revenues,” like transfers from other funds). From 2008-09 to 2009-10, revenues rose by about $1.98 billion (2.4%). Over two years, though, from 2007-08 to 2009-10, revenues dropped by $10.4 billion (-10.9%).

The loss leader in dollars over the two-year period is the personal income tax, which dropped $10.2 billion (-18.6%). Bank and Corporation taxes are a distant second, having fallen by $0.68 billion (-6.7%). Essentially every revenue source has fallen over the two years, but one major force in the other direction is Vehicle License Fees. In 2007-08, the state’s General Fund got none of this revenue; it all flowed to realigned health and human service programs. But decision-makers raised the rate and dedicated some of the increase to the state’s coffers effective late in the 2008-09 fiscal year. The General Fund realized the full force of that change in 2009-10, to the tune of $1.37 billion.

The three largest revenue sources for the state all saw significant movement over the past single year. In the one-year period from 2008-09 to 2009-10, the bank and corporation tax dropped by $2.8 billion (-23%), the sales and use tax rose by $2.96 billion (12.5%) due largely to a rate increase, and the personal income tax rose by $0.93 billion (2.1%), also due to a tax hike.
(See chart of Revenue Sources below)

Expenditures

Comparing General Fund expenditures over the past three fiscal years paints an interesting picture. Total General Fund spending has fallen by $19.4 billion (-18.75%). But it’s the details that make it interesting.

The most notable decline is in education. K-12 accounts for a full third of all spending reductions, having fallen from $35.6 billion in 2007-08 to $29.2 billion in 2009-10 (-$6.4 billion, or -18.1%). The UC and CSU systems, for their part, have lost just over 45% of their funding (-$2.8 billion combined). Community Colleges have lost $0.4 billion of their General Fund support (-10.1%), and “other education” is down $1.05 billion (-23.8%). All education items combined (including STRS) represent 57.4% of all spending reductions.

Only a couple of line-items have seen increases over these two years. Notably, debt service has grown by 38.7%, from $3.4 billion to $4.7 billion. Likewise, interest on loans has risen, though it accounts for only a sliver of the General Fund. Department of Mental Health spending out of the General Fund has risen by 24%, to $0.68 billion. CalWORKs has risen by 0.43%, or $0.01 billion, despite the flailing economy.

Other significant changes:
– Medi-Cal (-$3.59 billion; -26.0%), which accounts for 18.5% of all spending reductions.
– SSI/SSP/IHSS (-$1.02 billion; -19.31%).
– State Corrections (-$1.07 billion; -11.6%).

Among the very smallest of decreases over the past two years? The line-item for legislative/judicial/executive, which has fallen by 6.8%, one of only three lines with a single-digit percentage decrease.