SACRAMENTO — State revenues tumbled far below forecasts in the past three months and budget officials warn that emergency reserves could dry up if the economy continues to sag.
California took in $1 billion less than expected in income and corporate taxes and other revenues in July, August and September, the first three months of the fiscal year, according to figures released Tuesday.
Budget officials attribute the drop to an already weak economy and the financial fallout of the Sept. 11 terrorist attacks.
“Clearly we are heading for very difficult times here in California,” said Brad Williams, senior economist for the California legislative analyst’s office.
Gov. Gray Davis has warned that he will veto some bills because of expected budget shortfalls, and state departments are crafting plans to shave their budgets.
Assemblyman Tony Cardenas, an Arleta Democrat who chairs a special budget committee, said he will call for budget hearings before the beginning of the legislative session in January.
Davis signed a $103 billion state budget in July that included $2.6 billion in reserves. But Cardenas said continued monthly revenue shortfalls will likely exhaust the reserve before the end of the fiscal year.
“This year’s budget was termed the most difficult in 10 years, and next year’s will be even harder,” Cardenas said Tuesday in a prepared statement.
California’s treasury is highly dependent on income tax, capital gains, corporate profits and sales tax revenues.
The state’s income tax and corporate profit revenues fell $567 million short of projections in September, which is a key month in determining the state’s fiscal strengths.
And while officials haven’t determined the precise effect the attacks are having on the economy, they say that layoffs and consumer reluctance to spend have endangered the treasury.
Assembly Speaker Robert Hertzberg, D-Van Nuys, announced Monday the creation of a task force to study the impact of the attacks on the economy.
Davis, who has been pushing for residents to start flying again and visiting the state’s tourist spots, said he is concerned with the drop in consumer spending since the attacks.