Chapter Highlights Printable Budget Documents

Revenue Estimates

The revenue estimates reflect the broad-based decline in the global, national and state economies, which became undeniably apparent in late October 2008. Key factors negatively affecting California's revenue collections include the distressed stock markets, as well as the ongoing credit crunch, and continued fallout from the depressed housing market. As a result, corporate profits, individual income, and consumer spending have all contracted.

Baseline revenues in 2008-09 are now expected to total $87.5 billion-$3.9 billion below the 2008-09 November Special Session forecast and $14.5 billion below the estimate at the time the 2008 Budget was enacted in late September. For 2009-10, baseline revenues are expected to decline further to $86.3 billion, a 1.4-percent decrease from 2008-09. With the Administration's revenue proposals for addressing the budget shortfall, revenues are estimated to be $91.1 billion in the current year and $97.7 billion in budget year.

Figure REV-01 displays the forecast changes between the 2008 Budget Act and the Governor's Budget. The Governor's Budget forecast was prepared in early December, before individuals and corporations made final withholding and estimated payments for the 2008 tax year, and before consumers completed their December purchases. These critical December and January receipts can have a large impact on state revenues. This forecast will be revised in early May when these data and April income tax receipts are available.

The state's tax system is outlined in Figure REV-02. Tax collections per capita and per $100 of personal income are displayed in Schedule 2 in the Appendix. The revenue generated from each state tax from 1970-71 through 2009-10 is displayed in Schedule 3 in the Appendix.


MAJOR REVENUE PROPOSALS
The following tax law changes are proposed, including those proposed by the Governor for the 2008-09 November and December Special Sessions:

Temporary Sales Tax Increase: Effective March 1, 2009, the General Fund Sales and Use tax rate would be temporarily increased by 1.5 cents, from 5.0 percent to 6.5 percent. The proposed tax rate increase would be in effect through December, 2011. On January 1, 2012, the General Fund Sales and Use tax rate would return to 5 percent. This proposal is expected to generate additional sales tax revenues of $2.35 billion in 2008-09 and $7.114 billion in 2009-10 for the General Fund. These amounts include $356 million that will be transferred under Proposition 42 to the Transportation Investment Fund in 2009-10.

Broaden the Sales and Use Tax to Include Certain Services: Effective March 1, 2009, the sales and use tax would be extended to appliance and furniture repair, vehicle repair, and veterinarian services. Effective April 1, 2009, the sales and use tax rate would be applied to amusement parks, sporting events, and golf. Selection of these services was based on ease of implementation as these services are generally provided by entities that already have a relationship with the Board of Equalization. Assuming a 6.5-percent General Fund tax rate, this proposal is expected to generate additional General Fund sales tax revenue of $272 million in 2008-09 and $1.154 billion in 2009-10. These estimates assume initially low collections but significant improvements in collections over time. This proposal will also generate revenues for local government agencies of $113 million in 2008-09 and $479 million in 2009-10, including $21 million for local public safety funds in 2008-09 and $89 million in 2009-10.

Oil Severance Tax: Effective February 1, 2009, an oil severance tax would be imposed upon any oil producer extracting oil from the earth or water in California. The tax shall be applied to the gross value of each barrel of oil at a rate of 9.9 percent. Any oil produced by a stripper well, in which the average value of oil as of January 1 of the prior year is less than thirty dollars ($30) per barrel, will be exempt from this tax. This proposal is expected to generate additional revenues of $358 million in 2008-09 and $855 million in 2009-10.

Increase Alcohol and Excise Taxes by 5 Cents a Drink: Alcohol excise taxes would be raised by five cents per drink beginning February 1, 2009, with the proceeds to be used for substance abuse and prevention treatment programs. A drink is defined as 1.5 ounces of distilled spirits, 12 ounces of beer, or 5 ounces of wine, which equates to a per-gallon tax of $0.53 for beer, $1.28 for wine, and $4.27 for distilled spirits. This increase is estimated to raise $244 million in 2008-09 and $585 million in 2009-10. These estimates are adjusted to reflect an estimate of reduced consumption caused by the increase in price. Alcohol taxes were last raised in 1991. The Governor's Budget proposes that beginning July 1, 2009, proceeds generated from the additional excise tax be transferred from the General Fund to a newly created Drug and Alcohol Prevention and Treatment Fund.

Personal Income Tax Dependent Exemption Credit: Beginning with the 2009 tax year, the dependent exemption credit would be reduced to equal the amount of the personal exemption credit. Both credits are indexed annually for inflation. For the 1997 tax year, both exemption credits were $68. Chapter 612, Statutes of 1997, and Chapter 322, Statutes of 1998, increased the dependent exemption credit to $253 for the 1998 tax year and $227 for 1999, and indexed the credit for inflation each year thereafter. For the 2008 tax year, the personal exemption credit is $99 per filer (joint filers may claim $198) and the dependent exemption credit is $309 per dependent. Equalizing the credit amounts is expected to generate additional revenues of $1.44 billion 2009-10.

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CHAPTER HIGHLIGHTS for Revenue Estimates Back to Top

	General Fund Revenue
	Special Fund Revenue

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PRINTABLE BUDGET DOCUMENTS Back to Top
Budget Summary - Revenue Estimates (pdf * - 408K) -
Provides this entire Revenue Estimates Chapter in pdf format.

SCHEDULE 2 - Summary of State Tax Collections (pdf * - 117K) -
State Tax Collections per capita and per $100 of personal income.

SCHEDULE 3 - Comparative Yield of State Taxes (pdf * - 121K) -
Revenues for Major State Taxes from 1970-71 through 2009-10.

SCHEDULE 8 - Comparative Statement of Revenues (pdf * - 21K) -
Detail of General and special fund revenues by source for the past, current, and budget years within the following categories: (1) major taxes and licenses, (2) minor revenues, and (3) transfers and loans.