California Governor Jerry Brown promised that the new taxes that have gone into effect will balance the budget. Well, in November California revenues were $842 million below expectations, and California is $802 million under budget for the fiscal year (which began in July).

The problem for California is simple: Raising taxes causes people to change behaviors. That will be somewhat difficult initially (the income tax increase is retroactive for the entire 2012 tax year); however, 2013 is another story. While I do expect California’s April tax revenues to meet expectations, I doubt that many other months will do so. Also hovering in the background is the possibility of a $500 million bill to Gilbert Hyatt (the Nevada Supreme Court will decide that in the coming weeks).