Legislative Analyst's Office, November 1995

California's Fiscal Outlook

The LAO's Economic and Budget Projections
1995-96 Through 1997-98

CHAPTER 4 -- Part I
Expenditure Projections

In this chapter, we present our General Fund expenditure projections for 1995-96 through 1997-98.


Our projections are based on the following methodology and assumptions:


Figure 1 presents our General Fund spending projections. As shown, projected total General Fund spending grows from $41.7 billion in 1994-95 to $44.4 billion in 1995-96, $48.2 billion in 1996-97, and $51.3 billion by 1997-98. This amounts to an annual average growth rate between 1994-95 and 1997-98 of 7.2 percent as shown in the figure, with total spending in dollar terms increasing by $9.6 billion.


Figure 2 illustrates the current allocation of General Fund spending by program area. As shown, more than three-fourths of General Fund spending is devoted to education, health, and social services. Consequently, spending trends in these programs have a large impact on overall spending trends.

Faster-Growing Program Areas

More than half of the dollar increase in total spending over the forecast period is for Proposition 98 K-14 education spending. Proposition 98 spending is the largest single spending component in the budget, and the amount of state funding required to meet the Proposition 98 minimum guarantee grows rapidly-- 10 percent annually. This is primarily a result of projected growth in General Fund revenue, which increases the amount of the guarantee.

In addition to Proposition 98 spending, three other program areas will have relatively rapid spending growth:

Slower-Growing Program Areas

Figure 1 shows that projected spending grows more slowly than average for several program areas: