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Calif. takes in unexpected $2.5B in taxes

May 5, 2011 12:00:00 AM PDT
Some unexpected but welcome news in the state's budget crisis: Officials say there's a $2.5-billion surge in tax receipts. That windfall could complicate plans to close the deficit.

Since January projections, tax revenues continue at a strong clip. More people are working and buying things, and corporate taxes are up, based on numbers crunched by the Legislative Analyst's Office.

An unexpected $2.5-billion surge in income, sales and use taxes has lawmakers hoping this is a sign the state's finances are improving. The windfall could help solve the remaining $14-billion budget deficit.

"It's great for the state of California. It's great news for our economy. It means that things are starting to turn around a little bit. But ..." said Budget Chairman and state Assm. Bob Blumenfield (D-Los Angeles).

The big "but" is whether the money will continue to come in above forecast to avoid deeper budget cuts.

Governor Jerry Brown is preparing an updated budget proposal for release on May 16, but he will be on the conservative side, not counting on extra money coming in and still pushing to ask Californians to keep paying the expiring taxes for five more years for the long-term health of the state.

"He will continue to make his case for putting these temporary tax extensions before the people of California, not just because we have to deal with this year's budget gap, but also we have to deal with projected multi-billion-dollar budget gaps in each of the next three fiscal years," said H.D. Palmer, spokesman for the California Finance Dept.

Republicans say the bump in revenue is further proof there's no need for Californians to pay the higher taxes beyond June 30.

"The extra $2 billion that we get means it's a very manageable situation to get through this without reaching in the pockets of hardworking families that just can't afford it," said state Sen. Tony Strickland (R-Thousand Oaks).

Even if Brown manages to get his tax extensions on the ballot, teacher Robin Greer worries the public won't support them. She knows a $2-billion windfall is hardly enough to spare schools from cuts.

"Well, it makes me worry," said Greer. "It makes me worry that people are going to go: 'Oh, they're finding money now. We don't have to do this.'"

The boon could be a boost for schools too. Any extra revenue collected after June 30, 40 percent goes to schools as mandated by California's education-finance law, known as Proposition 98.