California's Budget Is Looking Massively Better Than Expected, And It's A Great Sign For GDP

In November 2012, I was interviewed by Joe Weisenthal at Business Insider. One of my comments during our discussion on state and local governments was:

I wouldn’t be surprised if we see all of a sudden a report come out, “Hey, we’ve got a balanced budget in California.”

At the time that was way out of the consensus view. And a couple of months later California announced a balanced budget, see The California Budget Surplus

The situation has improved since then. Here is the most recent update from California State Controller John Chiang: Controller Releases February Cash Update

State Controller John Chiang today released his monthly report covering California’s cash balance, receipts and disbursements in February 2014. Revenues for the month totaled $US5.6 billion, surpassing estimates in the 2014-15 Governor’s Budget by $US968.9 million, or 20.9 per cent.

Driven by strong retail sales and personal income tax withholdings, February receipts poured in at nearly $US1 billion above projections,” said Chiang. “How we conserve and invest during the upswings of California’s notorious boom-or-bust revenue cycles will determine how critical programs — such as public safety and education — will weather the next economic dip. With fiscal discipline and a focus on slashing debt, we can make California more recession-resistant and prosperity a more enduring hallmark of our state.”

Income tax receipts exceeded the Governor’s expectations by $US721.7 million, or 45.7 per cent. Corporate tax receipts came in ahead of estimates by $US87.4 million, or 236.2 per cent. Sales and use taxes were $US113.7 million above, or 3.9 per cent, expectations in the Governor’s 2014-15 proposed budget.

The State ended the month with a General Fund cash deficit of $US14.1 billion, which was covered with both internal and external borrowing. That figure was down from last year, when the State faced a cash deficit of $US16.2 billion at the end of February 2013.
emphasis added

This is just one state, but I expect local and state governments (in the aggregate) to add to both GDP and employment in 2014.

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