by Calculated Risk on 3/10/2014 02:37:00 PM

In November 2012, I was interviewed by Joe Weisenthal at Business Insider. One of my comments during our discussion on state and local governments was:

I wouldn’t be surprised if we see all of a sudden a report come out, “Hey, we’ve got a balanced budget in California.”

At the time that was way out of the consensus view. And a couple of months later California announced a balanced budget, see The California Budget Surplus

The situation has improved since then. Here is the most recent update from California State Controller John Chiang: Controller Releases February Cash Update

State Controller John Chiang today released his monthly report covering California's cash balance, receipts and disbursements in February 2014. Revenues for the month totaled $5.6 billion, surpassing estimates in the 2014-15 Governor's Budget by $968.9 million, or 20.9 percent.

"Driven by strong retail sales and personal income tax withholdings, February receipts poured in at nearly $1 billion above projections," said Chiang. "How we conserve and invest during the upswings of California's notorious boom-or-bust revenue cycles will determine how critical programs – such as public safety and education – will weather the next economic dip. With fiscal discipline and a focus on slashing debt, we can make California more recession-resistant and prosperity a more enduring hallmark of our state."

Income tax receipts exceeded the Governor’s expectations by $721.7 million, or 45.7 percent. Corporate tax receipts came in ahead of estimates by $87.4 million, or 236.2 percent. Sales and use taxes were $113.7 million above, or 3.9 percent, expectations in the Governor's 2014-15 proposed budget.

The State ended the month with a General Fund cash deficit of $14.1 billion, which was covered with both internal and external borrowing. That figure was down from last year, when the State faced a cash deficit of $16.2 billion at the end of February 2013.
emphasis added

This is just one state, but I expect local and state governments (in the aggregate) to add to both GDP and employment in 2014.