California tax revenue was 10% lower than projections in July, with retail and sales tax revenue down a staggering 33.5%. The total shortfall for the month was $475 million.
In the fine tradition of mindlessly cheery statements not backed by any remblance of reality, State Controller John Chiang said was “too soon to attribute lower- than-expected sales taxes in the month to slower private consumption.” Instead he blamed the shortfall of flying monkeys that somehow managed to raid the state treasury and eat the sales tax revenue.
Ok, he didn’t actually say that part about the flying monkeys but he might as well have. The California cash deficit as of July is now $18 billion, up from $9.6 billion last June and Chiang and the rest of California’s politician continue their deranged game of pretend and extend.
But that game may be nearing its end.
The state has avoided default by temporarily borrowing from state trust funds, but those accounts will soon need their cash back to continue operating. Today California quickly began trying to sell $10 billion in municipal bonds to fund the record $28 billion they need to keep the lights on. With tax revenue plummeting and the state already the second lowest rated credit in the country, if the independent credit rating agencies downgrade the state to “junk bond”, California will be short up to $18 billion and default.
The California tax revenue shortfalls are now in crisis mode. Yet the state continues to bumble, evade, and basically lies to the public about what is going on.