Monday, February 10, 2014

The California Budget Surplus: Stock and Flow

by Bill McBride on 2/10/2014 05:03:00 PM

Over a year ago, I predicted that California would run an annual budget surplus soon. Several people wrote to me and said that can't be correct ... they heard California still had a significant amount of debt. That is also correct. This is a stock and flow issue. The cash deficit is the stock, and the annual budget surplus is the flow. 

Even with a budget surplus, California still has $12.6 billion in debt. From California State Controller John Chiang:

The State ended the month with a General Fund cash deficit of $12.6 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 $15.7 billion at the end of January 2013.
It will take some time to pay down the cash deficit, but the state is running an annual budget surplus.

And on January cash update:
State Controller John Chiang today released his monthly report covering California's cash balance, receipts and disbursements in January 2014. Revenues for the month totaled $12.2 billion, surpassing estimates in the 2014-15 Governor's Budget by $387.7 million, or 3.3 percent.

"Strong revenues for the month of January confirm California is continuing its slow climb out of the wreckage of the Great Recession," said Chiang. "Better-than-expected income tax receipts -- particularly those straight from paychecks – could indicate Californians are working and earning more."
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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