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ha_MATOSANTOS6317.JPGGov. Jerry Brown is clearly concerned about the political consequences that California's income tax revenue spike may have on his tax proposal.

Brown's finance director, Ana Matosantos, issued an unusual statement Friday morning downplaying new data showing California has received $2.54 billion more in general fund revenues than had been expected.

The statement comes 10 days before Brown is scheduled to deliver his May budget revision.

"While tax receipts are currently running higher than projections, this should in no way be taken to mean that we can ease up on our efforts to close the remaining budget gap," Matosantos said. "Changes in our cash receipts aren't the only issue that drive the size of our budget gap."

"We have to account for lost savings based on the timing of the Legislature's actions to date on the governor's January proposal," she added. "If there are more Californians projected to be enrolled in our schools or our health care programs, and if there are more inmates projected in our prison system, that will drive costs up.

"And in addition, roughly 40 percent of additional revenues will be controlled by Proposition 98. The state faces multibillion-dollar budget shortfalls in each of the next three fiscal years unless we adopt ongoing solutions that control state government costs and put the state on a path to long-term structural balance."

The positive tenor of recent revenue news is not the best way to sell the electorate -- or pressure GOP lawmakers -- on the need for additional taxes.

It's true that even with revenues running ahead of schedule, the state will still face a significant deficit problem around $10 billion. Brown's administration is trying to make the argument that California still has a revenue problem, even if it's not as great a revenue problem as previously thought.

Revenues make up one side of the state's balance sheet, but Matosantos emphasized the other side dealing with expenditures. Some points there:

Caseload and population growth. It's true that caseload and population growth may have driven costs higher than expected in prisons, schools, social services and health care. But it's worth noting that Finance said in a press release last week that the prison population declined in 2010 for the fourth year in a row. Not only that, but the same release said the state's 2010 population growth was 0.8 percent -- slightly below the 0.91 percent that Finance reported for fiscal year 2009-10. It's possible that there was growth in health and welfare programs, though at least one of them -- In Home Supportive Services -- has seen its growth slow dramatically.

Lost savings based on legislative inaction. Finance spokesman H.D. Palmer said this refers to one month of savings in June, as Brown had originally proposed. Still, one month of health and welfare cuts should be less than $1 billion. Because there will not be a June tax election, it's unclear whether further erosion could occur.

Revenues controlled by Proposition 98. It's true that roughly 40 percent of added revenue growth normally goes toward Proposition 98's minimum guarantee for K-12 and community colleges. But the current $2.54 billion revenue spike is not subject to Proposition 98 because lawmakers suspended the guarantee for the current 2010-11 fiscal year, so that money can go toward deficit relief. Matosantos was more likely referring to any change in revenue growth that has been forecast for 2011-12.

Ongoing multibillion-dollar shortfalls. It's true that the state faces significant deficit problems into the foreseeable future, though these shortfalls should now be smaller than projected in January because of actions taken by the Legislature as well as better revenue growth. Still, Brown wants tax extensions not just as a onetime solution but to resolve the state's budget problems over the next five years.

PHOTO: Ana Matosantos, Director of Finance, in her office on Thursday, Dec. 2, 2010 at the State Capitol. Hector Amezcua/The Sacramento Bee



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