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California's Red Ink Still Getting Redder

Friday, 9 Oct 2009 | 5:56 PM ET

California's finances are in worse shape than expected three months into the fiscal year. State Controller John Chiang says income is nearly $1.1 billion below the most recent budget estimates.

Golden Gate Bridge
Photo by: Thierry
Golden Gate Bridge

"While there are encouraging signs that California's economy is preparing for a comeback," Chiang says, "the recession continues to drag state revenues down."

Controller Chiang says September revenues missed in all three major categories.

When adjusted for repayments of IOUs issued last summer, personal income tax revenues were $923 million below estimates (-17.3 percent), corporate taxes missed by $183 million (-10.5 percent), while sales taxes came in nearly $100 million below expectations (-4.5 percent).

California started the fiscal year July 1 with a nearly $12 billion cash deficit which grew to over $16 billion by the end of September. The deficits are being covered by internal borrowing and by selling short term notes in the market.

The news comes the same week California failed to sell all of a $4.5 billion general obligation bond offering.

"I urge lawmakers and the Governor to prepare for more difficult decisions ahead," Chiang said.

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