California revenue jumps, tax refunds should be paid on time

SAN FRANCISCO (Reuters) - California's revenue in February was $480 million or 8.7 percent above the estimate in Governor Arnold Schwarzenegger's state budget plan, so tax refunds should be paid on time, State Controller John Chiang said on Wednesday.

There had been some talk in the state capital of Sacramento that tax refunds could be delayed, as they were temporarily last year, to help the state government preserve cash while Schwarzenegger and lawmakers tackle closing a state budget gap of $20 billion.

The state's cash position, however, is better than expected, according to Chiang's office.

"Revenues came in above projections for the third month in a row, continuing a positive trend that shows California is on the road to recovering from the recession," Chiang said in a statement.

"Given February's numbers and recent action from the Legislature to improve the state's cash flow, Californians should expect to receive their hard-earned tax refunds on time," Chiang added.

The controller, as he routinely does, urged a speedy budget agreement that balances the state government's books, something that Wall Street rating agencies, which have the state's credit rating just a few notches above "junk" status, would also like to see.

"While the worst may be behind us, we still face cash challenges later in the summer absent enactment of further credible and sustainable budget and cash solutions," Chiang said.

According to Chiang's office, California's year-to-date receipts are ahead of budget estimates by $1.94 billion, or 3.9 percent, and the state government's cash position was $2.15 billion ahead of projected levels on February 28.

Chiang released his revenue report as the second day of a two-day retail order period for a $2 billion general obligation debt sale by California neared its close.

As of Wednesday afternoon, California had recorded orders for $1.38 billion of the tax-exempt debt as individual investors looked past the state's budget troubles, according to analysts.

(Reporting by Jim Christie, Editing by Phil Berlowitz)