California's tax revenues will fall $6.5 billion short of Gov. Jerry Brown's prediction, even with an expected boost from Facebook's initial public stock offering and if voters approve the governor's proposed tax initiative later this year, according to a forecast released Monday.
The nonpartisan Legislative Analyst's Office found that projected tax revenue for the coming fiscal year will remain lower than Brown estimated in his January budget proposal. Without the Facebook IPO, revenue could be $8.5 billion lower.
If the analyst's prediction comes true, it could widen the state's current $9.2 billion deficit. Along with mixed signals from the overall economy, the governor and Legislature face difficult decisions ahead.
"If our revenue forecast proves to be more accurate than the administration's, the Legislature and the governor will have to identify additional budgetary solutions to bring the 2012-13 state spending plan into balance,'' the report stated.
Brown's finance spokesman, H.D. Palmer, said the forecast helps the governor make the case for his November ballot initiative, which would raise taxes temporarily. Brown aims to raise income taxes on individuals who make $250,000 a year or more and boost the state sales tax by half a cent.
"It also highlights the fact that the pending IPO by Facebook, while potentially significant, can't be expected to lessen the need to take tough steps now to balance the budget,'' Palmer said.
The analyst recommended that lawmakers wait until more information becomes available by the end of April, when the state receives a large amount of income tax payments.
California's general fund relies heavily on income taxes and capital gains taxes, which are sure to see a bump with the wealth to be made off Facebook stock sales.
The analyst found that wealth generated by a Facebook stock offering could increase state revenue by $500 million in the current fiscal year and $1.5 billion in the 2012-13 year.
The wealthy are essential to funding California state government: The top 1 percent of income earners pay about 40 percent of all income tax, the dominant source for the state's general fund.