Windfall Revenue Remains

In January, the state controller reported a surprise windfall of about $4 billion arrived in personal income tax revenue.  It was unclear why but possibly it had to do with speculation by wealthy taxpayers about the fiscal cliff or prospective income tax changes at the federal level.  No one knows.  An interesting question was whether the windfall would unwind in February, i.e., come in below estimates.  It did unwind a bit.  But basically, there still is an unforeseen extra $4 billion in revenue so far this year. What the impact might be on the state budget for the coming year has yet to be seen.  The governor’s budget proposal was developed before the extra money arrived. He probably would not favor treating what may be a one-shot windfall as an ongoing flow. However, the legislature might see the matter differently.