State Tax Revenue Falls Below Expectations

By Mary Harris
|  Thursday, Aug 11, 2011  |  Updated 6:39 AM PDT
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State Tax Revenue Falls Below Expectations

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File Photo: California Gov. Jerry Brown stands next to a chart that shows dollar amounts in the millions that were cut from the state's budget following a bill signing on March 24, 2011.

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California's rocky economy just got rockier.

The state's tax revenue for the month of July was $539 million less than the state had expected.

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That loss represents 10 percent of general fund money. Some of that loss can be attributed to people spending less, but perhaps more significant is the loss of money the state collects from capital gains taxes.

Capital gains taxes are tied to the stock market. These July losses come prior to the stock market plunges of the last week. That impact will be reflected next month, but the turbulence of the market is making many skeptical about the state's ability to make up for those lost revenues in the coming months. In other words -- things could be getting worse.

If revenues do not increase, and meet the state projections, that could mean deeper cuts to an already cut-back educational system.

"While we hope for better news in the months ahead, every drop in revenues puts us closer to the drastic trigger cuts that could be imposed next year," said State Controller John Chiang.

Specifically local school districts might shorten their school year by up to seven days. At the community college level, schools would be forced to raise tuition. Again. Additional cuts could also hit public safety and social services.

And while schools are bracing themselves for additional cuts, some budget experts say there is still some hope for a turnaround.

"Clearly, the events of the last couple weeks have not been good ones," said Mac Taylor, the Legislature's nonpartisan budget examiner, in an interview with the Los Angeles Times.

But he urged people not to place too great an emphasis on data from a single month.

"It's still early," he said.

The California Department of Finance will wait until December (halfway through the state's fiscal year) before saying whether or not the state is on target.

Still these anxious economic times both nationally and locally, are causing many to prepare for the worst.

In an interview with the Sacramento Bee, Scott Lay, president and CEO of the Community College League of California, said he will recommend to his district that they assume the state will not get back on financial track.

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