Cash collection disappoints, but deficit borrowing will be lowest in four years

California’s cash balance was 6% lower than estimates, largely with a drop in personal income taxes.

The state collected $4.8 billion in July, compared to projections of $5.1 billion, according to the State Controller’s Office.

“Reflective of the state’s improving fiscal health, California’s upcoming cash flow for borrowing is shaping up to be the smallest in four years,” says State Controller John Chiang. “While this month’s numbers disappoint, reaction must be tempered by the fast that July is often the state’s least significant revenue collection month.”

California State Controller John Chiang.
California State Controller John Chiang.

Personal income taxes were $273 million – or 7% — lower than projections in the state budget. Corporate taxes and sales-tax revenue were up 4.9% and 0.9% from projections.

The state ended the month with a cash deficit of $10.9 billion, covered with internal borrowing from other funds.

California will only need about $5.5 billion in short-term borrowing this fiscal year, the lowest in four years – and about half the amount in 2012-13, Chiang says.

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CalPERS enjoys 12.5% annual gains, thanks to real estate, stocks

Real estate and stocks generated a nifty performance during the just-completed fiscal year for California Public Employees’ Retirement Service (CalPERS).

The massive pension fund enjoyed a 12.5% gain during the fiscal year, outperforming its benchmark by 1.5 percentage points, officials say. The annual increase easily outpaces 20- and 25-year returns, and allows CalPERS to meet its current and future obligations for retirees.

Stocks led the way, with a 19.0% increase, followed by private equity at 13.6% and real estate at 11.2%. Income-generating properties — such as office, industrial and retail – accounted for much of the gains in real estate.

“When things got rough, we didn’t panic,” says Joe Dear, chief investment officer for CalPERS. “We stuck with our exposure to growth assets and applied the lessons we learned from the past. The numbers show is that our approach is working.”

CalPERS assets topped $257.8 billion at the end of June.

“CalPERS is a long-term investor and we try to not focus too much on one year of performance,” says Henry Jones, chairman of the CalPERS Investment Committee. “But, obviously, 12% is a great number and we’re pleased with the performance.”

CalPERS is the nation’s largest pension fund, administering benefits for 1.6 million current and retired public workers.


Golden State ends fiscal year $2 billion in the black

A better economy coupled and voter-approved tax initiatives greatly increased the state’s revenue last month – and during the just-completed fiscal year.

California collected $13.1 million in June, a head-turning $1.2 billion more than the governor’s projections, according to the State Controllers Office on July 10. And fiscal-year revenue finished at $100.1 billion – a nifty $2 billion more than projected.

It’s an about-face and dramatic turnaround after several years of shortfalls.

“Rising employment, economic expansion and voter-approved tax increases have generated revenues outperforming even the rosiest projections,” says State Controller John Chiang. “However, California’s history of revenue cycles should be a cautionary tale that informs our spending decisions and incentivizes policymakers to prudently pay down accumulated debt.”

California State Controller John Chiang.
California State Controller John Chiang.

Across the board, larger-than-expected gains generated the $1.2 billion increase. Corporate taxes were $373.5 million – or 21.5% — more than projections. Personal income tax and sales-tax revenue beat estimates by $644.6 million and $70.1 million respectively.

California’s better job growth helped boost personal income tax – and encouraged more spending by consumers.

California entered the 2011-12 fiscal year with a cash deficit of $9.6 billion, which has been narrowed to $2.4 billion at the end of June. Internal borrowing from specials fund is covering the shortfall.


UCLA Anderson Forecast: Modest economic growth

California’s economy will continue to improve during the next three years, benefiting from the much-improved housing market, according to a new report.

But job growth and personal income gains will be modest, at best, especially compared to the historic rate, according to the UCLA Anderson Forecast.

UCLA Anderson senior economist Jerry Nickelsburg says the jobless rate will dip to an average of 9.6% this year, before dropping to 8.4% and 7.2% during the next two years. Real personal income growth – a closely watched figure that greatly affects consumer spending – will improve 1.4% this year, and peak at 3.6% in 2014 before sliding to 3.3% in 2015.

California’s economic growth, which has been buoyed by exports, will likely mirror the national estimates of 1.9% this year before climbing to 2.8% and 3.1% in 2014 and 2015, respectively, according to UCLA Anderson Forecast senior economist David Shulman.


Car sales gain for 15th-consecutive quarter, up 25% in 2012

A better economy, easier-to-find credit and higher trade-in values helped new-car sales increase for the 15th-consecutive quarter, the latest evidence of improving consumer confidence in California.

Fourth-quarter accelerated 22% compared to a year ago, and annual registrations reached 1.6 million vehicles, a 25.3% increase vs. 2011, according to the California New Car Dealers Association in Sacramento. Basically, registrations and sales are the same, since buyers must register their vehicles.

New-car sales are critical to the California economy, especially since cash-strapped state and local government depend heavily on sales-tax revenue. However, industry analysts warn the double-digit gains of the past few years are likely over, predicting a more modest 8.2% increase to 1.75 million vehicles in 2013.

But automakers should celebrate a rather impressive 2012.

Korean automaker Kia enjoyed the biggest gain last year, selling 59,557 vehicles – up 53.3%, the best performance among the 15 top-selling brands. Subaru followed with a 44.2% increase, while Toyota/Scion at 39.1% and Volkswagen at 37.9% finished in third and fourth place, respectively.

A Honda dealership in the auto mall in Elk Grove, a suburb of Sacramento.
A Honda dealership in the auto mall in Elk Grove, a suburb of Sacramento.

American, European, Japanese and Korean manufacturers reported at least 17% increases in 2012, according to the state trade association. Korean automakers – think Hyundai and Kia – led the race at 35%, followed by Japanese manufacturers at 30.3%. American automakers enjoyed a 17.6% boost in sales from a year ago.

Toyota remained the state’s best-selling brand last year with 296,141 vehicles compared to the 212,888 in 2011. Honda finished at No. 2, with 181,382 vehicles, a 30.2% gain, while Ford finished in third place with 176,408 vehicles, a 13.2% increase. Chevrolet was a distant fourth with 133,445 cars and trucks sold, but a still solid 12.5% improvement from 2011.

Chrysler (78.8%), Lexus (31.0%) and Acura (29.2%) also reported good sales volume in 2012. But the three brands are not listed among the 15 best-selling brands in the state.

Only four automakers went in reverse last year, paced by Mitsubishi and Lincoln with declines of 18.6% and 13.7%, respectively. Volvo and Jaguar also slid in 2012.

Higher gas prices and thinner pocketbooks played a major role in the best-selling model race, with 60,688 hybrid Toyota Priuses selling in 2012, followed close behind by second-place finisher Honda Civic with 57,124 vehicles. Toyota sold 50,250 Camrys, a previous top-seller, followed by the Honda Accord at 49,420 for third and fourth place, respectively.

The Ford F-150 remains the best-selling full-size pickup – and one of the best-performing models overall – in the state, with 25,434 hitting the street, about 7,400 more than the Chevrolet Silverado. The Dodge Ram finished in third with 11,299 units.

Car-crazy California easily outpaced new-car sales in the rest of the nation, which had a 13.4% increase in 2012.


San Jose economy best in California, Sacramento the worst

San Jose boasted the best economy during the past three years, largely because of the booming tech industry and fast-paced hiring by companies such as Apple Corp., Google Inc. and Facebook Inc.

Silicon Valley’s economy grew 18% from 2008 to 2011, easily the largest in the state and 50% better than second-place Oxnard, according to the U.S. Bureau of Economic Analysis. Silicon Valley’s GDP climbed to $177 billion in 2011, the most recent figures available.

San Jose had the best economic growth during the past three years, easily beating the national average.
San Jose had the best economic growth during the past three years, easily beating the national average.

Ten cities in California beat the average national economic growth of 5.0% during the three-year period. Only San Jose, Oxnard and Madera (11.6%) had more than double the national average, according to the annual report.

Sacramento – a region dominated by government employment – had the smallest economic growth during the three-year period. Stockton, El Centro, Santa Rosa and Vallejo were also among the five worst cities in the state.

The federal report did not include metropolitan regions with flat or a decline in GDP, including Los Angeles-Riverside, Redding and Santa Cruz.

Beaumont, Texas, had the highest growth rate at 34% in the three years, while Casper, Wyo., endured the largest decline at 14%.