California may cut spending plan amid lower than expected tax receipts

[May 13, 2016]  By Sharon Bernstein

SACRAMENTO, Calif. (Reuters) - California Governor Jerry Brown on Friday is expected to amend his proposed $170.7 billion spending plan for the next fiscal year in the wake of unexpectedly low tax revenues.

In January, Brown proposed a new state budget that increased public spending on education, healthcare and infrastructure in an indication of the state's continued rebound from years of economic doldrums.

But earlier this week, state officials said that tax revenues for the first four months of the year were $869 million below projections, due in large part to unexpectedly low income tax revenues in April, which were more than $1 billion below expectations.

It was an unpleasant surprise that may spur the fiscally moderate Brown to tighten spending plans as part of his annual budget mid-year revision due out Friday.

"We had to adjust our fiscal plan to account for the fact that among other things April receipts were about a billion dollars below what the month's projections had been," said H.D. Palmer, Brown's spokesman on financial and budget matters.

Palmer would not detail any changes to Brown's proposed budget in advance of its release on Friday.

The 77-year-old governor, who also led the state from 1975 to 1983, has been notoriously tight-fisted since returning to office in 2011, reining in spending proposals by the state's liberal Democratic majority lawmakers to build a rainy day fund and hold down expenses after facing down a $27 billion budget deficit.

Tighter finances this year could disappoint progressive Democrats in the legislature, who have pushed Brown to restore spending on social programs cut during the 2008 recession.

A budget expert on the Democratic side who spoke on condition of anonymity said he was expecting the state to end the 2015-2016 fiscal year with about $1 billion less in revenue than projected.

But Kevin Liao, a spokesman for Assembly Speaker Anthony Rendon, a Democrat from Southeastern Los Angeles County, said the state's economy remains stable and the economy is still growing.

"We remain optimistic that we can continue investing in programs that help California families while remaining fiscally prudent," Liao said.

Jason Sisney, a finance expert with the state Legislative Analyst's Office, said the lower income tax revenues were likely spurred by slower than expected growth in wages and less income from capital gains in last year's sluggish stock market.

(Reporting by Sharon Bernstein; Editing by Bernard Orr)

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