Gov. Jerry Brown is counting on $6.5 billion too much through June 2013 even with a Facebook stock sale on the horizon, according to a new review by the state's fiscal analyst.
The nonpartisan Legislative Analyst's Office has taken a more pessimistic view of capital gains in California over the next 16 months, though it acknowledges in its new report that predicting those totals is "notoriously difficult." California's heavy reliance on volatile capital gains income has been a huge reason why the state has found it so difficult to budget in recent years.
The analyst's latest revenue forecast is not that different from its November projection, which translated into Brown being too optimistic by almost the same amount as today's report. Based on that projection, the analyst pegged California's deficit at nearly $13 billion at the time. Brown, using a more optimistic forecast, says the deficit is only $9.2 billion.
The LAO's Jason Sisney says that his office is not ready to update its deficit total because that requires other calculations such as how much schools are owed. But he said "in general it's worse than the governor's January forecast. By how much, we don't know."
"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 analyst's office writes. "Much more information will become available by the end of April, when a large amount of income tax payments are received by the state and refund payments are made."
Due to this unpredictability, the analyst's office explicitly recommends today that the Legislature wait until the governor revises his budget in May before writing the 2012-13 budget. But the latest news is hardly reassuring for legislative Democrats who said they were counting on an even more fruitful April than Brown predicted to avoid the deep health and welfare cuts the governor proposed.
The analyst's office would have been even more pessimistic had Facebook not filed paperwork for an initial public stock offering this month. The office estimates that California will receive about $2 billion through June 2013 in Facebook IPO-related income tax payments than it would have otherwise.
Updated at 11:55 a.m. with comment from Jason Sisney.