A billion more....

Personal income taxes in June were $987 million below (-18.0%) estimates in the May Revision, and sales taxes were short by $154 million (-5.8%).

The above item was in a July 10 news release from State Controller John Chiang as his department released the June 2009 Financial Statement for the State of California.

If you were looking for that in the news, you'd have to stumble across this blog item in the Sacramento Bee or this California Briefing short in the Los Angeles Times. Don't try to find it as a news story in these or the other major newspaper or TV news websites as it's a waste of time.

This apparent non-news is that collections of two of California government's primary sources of income - income and sales taxes - ran a $1.14 billion (16.3%) short of the estimates. These are the estimates used in the current discussions of the estimated 2009-10 budget which already was $26.3 billion out of balance. It appears that the deficit just increased by another 4%, until July's figures come in.

On May 26 the following statement was offered here:

While most Californian's don't see the magnitude of the problem, the State and local governments of the world's 8th largest economy will suffer a financial shock over the next 6 months.

Nothing that is about to happen should be a surprise. Everything written here since May 26 is based on information available to anyone. So why was the State's May budget estimate 16% off on income and sales tax revenue? The answer is simple but I'll let someone else explain it. From a July 5 Associated Press article on politicians blaming someone other than themselves for bad estimates:

State forecasts often rely heavily on national models, which also have been wrong, said Wilbur Maki, a professor emeritus in the Department of Applied Economics at the University of Minnesota who served as state economist in the early 1980s. The depth of the recession and its effect on financial institutions and housing markets also have made it difficult to compare to other downturns, he said

"This recession is especially troublesome," Maki said, "so there is very little immediate past experience that would help to make the forecast."

That, of course, is the crux of the problem. The national estimates showing that "The Great Recession" is "showing signs" of a recovery are off by a factor of two years for California. All raw data indicates that there is no room for optimists in the halls of California government but plenty room for panic.

As noted here July 8, the taxpayers of the State of California needs to find a way to avoid a deficit in excess of $50 billion at the end of 2010, not $26.3 billion and that's without considering state pension fund losses. Further, that $50 billion number could easily be 50% low.

The Obama Administration and the world must stop offering the most optimistic forecasts in what economist Maki admitted is an "especially troublesome" recession in which to make forecasts. Among other problems, what was the world's 8th largest economy - California's economy - will drag everyone else down with it because of those forecasts.