More on California Fiscal Policy: Outlook Strong for Fiscal Year 2013-14 Receipts

Published September 10, 2013

What a difference a year makes. With the economy rising and Proposition 30 approved, the State’s General Fund condition is better than it has been in recent memory. Governor Jerry Brown expects the State’s operating budget — inflows minus outflows — to balance in the current year. In fact, his Department of Finance estimates the State will net $3 billion more in receipts than disbursements for the year. Yet, the State still took out $5.5 billion in external, short-term borrowing to cover monthly bills from now until June 30. 2014. The borrowing, which is a common practice among big states, helps cover seasonal cash flow deficits during the fiscal year.

A look at cash flows — that is, the month-by-month receipts and disbursements — shows that California spending is not evenly distributed over the months. It disburses about $15.5 billion (about 28 percent) more in the first six months than in the last six. But 60 percent of revenues come in during the last six months.

The mismatch in monthly outflow and inflow causes the State to run cash deficits for most of the year. By September 2013, the Department of Finance expects a cumulative cash deficit of more than $10 billion, rising to $15 billion by November. The lines in Figure 2 compare the monthly cumulative disbursements with the monthly cumulative receipts. The disbursement line runs above the receipt line until June, when the lines cross.

From September to March, the cash deficit hovers between $10 billion and $15 billion. The deficits are covered by borrowing from internal funds (including special funds), and external sources (such as a revenue anticipation note, or RAN).

The red and black bars in the figure illustrate the cumulative monthly cash deficit/surplus. The figure shows that the State’s large revenue months — January, April and June — generate enough “extra” receipts to pull the State into a cash surplus. These three months account for 39 percent of all receipts.


Figure 2: General Fund Cashflows by Month

Cumulative Disbursements and Receipts

Dollars in Millions, 2013-14

The lines in Figure 1 compare the monthly cumulative disbursements with the monthly cumulative receipts.

Source: DOF

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