The headline screamed doom and gloom: CALIFORNIA SALES TAX REVENUE DROPS 33.5%.

Granted, it was Breitbart.com—a noted right-wing, liberal-hating, California bashing website that takes pride in its outrageousness. But this time it was just citing a report by California’s State Controller John Chiang, who found that revenue collections in July were “disappointing.” Sales taxes were $295 million below budget projections, adding to the already imposing projected multi-billion-dollar state budget deficit. The details are here.

So why is the state’s tax collector, the Board of Equalization, now saying that California actually pulled in $17 million more in July than the budget projection, not $295 million less?

The reason is a not-so-subtle subtlety that contributed to confusion over potentially billions of dollars of hidden money lurking in state “special funds” that never materialized: there are two different ways to account for the state’s money that are not much different than personal finance accounting.

You can add up all the receipts and expenditures, or you can look at the bank balance. They might not tell the same story.

The controller looks at money in the government’s possession, while the board also considers money it has collected but not yet sent over to the state treasury. Board member George Runner said that hundreds of millions of dollars were received very late in July, accounting for much of the difference in estimates between the two agencies.

It’s “money in the bank” versus “money in the door.”

–Ken Broder

To Learn More:

July Sales Tax Revenues Didn’t Plummet (by George Runner, Board of Equalization member) (pdf)

Controller Releases Cash Update (State Controller’s Office)

Statement of General Fund Cash Receipts and Disbursements (State Controller’s Office) (pdf)

California Sales Tax Revenue Drops 33.5% (Breitbart.com)