State Budget Condition Publications

The 2017-18 Budget: Overview of the Governor's Budget

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January 13, 2017 - This publication is our office’s initial response to the Governor's 2017-18 budget proposal. The administration's estimates anticipate slow growth in the personal income tax (PIT), the state’s dominant revenue source. The Governor’s estimate of PIT growth in 2017-18 is probably too low. As a result, by the May Revision, the state could have more General Fund revenue than the Governor now projects, but much of that revenue would be required to go to schools and Proposition 2 reserves and debt payments. Facing uncertainties we have long discussed about the economy and new uncertainties about changes to federal policy, the Legislature may want to set a target for total state reserves at—or preferably above—the level the Governor now proposes.

The 2017-18 Budget

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January 1, 2017 - An index of publications on the 2017-18 budget.

Cal Facts: 2016

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December 5, 2016 - With a state as big, as populous, and as complex as California, it would be impossible to quickly summarize how its economy or state budget works. The purpose of Cal Facts is more modest. By providing various "snapshot" pieces of information, we hope to provide the reader with a broad overview of public finance and program trends in the state.

Cal Facts consists of a series of charts and tables which address questions frequently asked of our office. We hope the reader will find it to be a handy and helpful document.

Fiscal Outlook Supplement on Proposition 2

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November 16, 2016 - On November 16th our office released its annual Fiscal Outlook. The outlook provides our assessment of California’s budget condition through 2020-21. This post provides more details on the outlook’s estimates of constitutionally required debt payments and reserve deposits under Proposition 2.

The 2017-18 Budget: California's Fiscal Outlook

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November 16, 2016 - Under our current projections, assuming no changes in existing state and federal policies, we estimate the state will end the 2017-18 fiscal year with $11.5 billion in total reserves. This includes $8.7 billion in required reserves, which must be deposited into the rainy day fund, and $2.8 billion in discretionary reserves, which the Legislature can appropriate for any purpose. These reserve levels reflect the continued progress California has made in improving its budget situation. Our estimates include the effects of statewide ballot measures that were approved on November 8. The condition of the state budget depends on many volatile and unpredictable factors. This uncertainty is present in the near term and becomes greater in each subsequent year. We discuss two illustrative economic scenarios for the fiscal years after 2017-18. Under a mild recession scenario, the state would have enough reserves to cover its operating deficits through 2020-21. This means, under our assumptions, the state could weather a mild recession without cutting spending or raising taxes. However, this conclusion assumes that the state does not make any changes to its current policies and programs in any year during the outlook. This outlook also assumes no changes in federal policy, even though the recent election results suggest some such changes are now likely. State or federal policy changes could have a significant impact on the state's bottom line.

The 2016-17 Budget: California Spending Plan

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October 5, 2016 - Each year, the Legislative Analyst’s Office publishes the California Spending Plan to summarize the annual state budget. This publication discusses the 2016–17 Budget Act and other major budget actions approved during 2016. Unless indicated otherwise, figures and dollar amounts generally refer to budget actions passed as part of the June 2016 budget package, as signed into law on June 27 and July 1, 2016. In some cases, as noted, we discuss later budget actions approved during August 2016 by the Legislature. During August, for example, the Legislature and the Governor agreed to spend certain cap–and–trade funds. The budget totals include $400 million (General Fund) for affordable housing even though the Legislature and Governor have not reached agreement on this spending.

This year's California Spending Plan includes an interactive graphic to help the reader visualize how the state budget spent $167 billion in total state revenues.

Supplemental Report of the 2016-17 Budget Package (Updated)

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August 16, 2016 - Statements of legislative intent and requests for studies adopted during deliberations on the 2016-17 budget package. (Updated 1/5/17)

Legislature. Legislation and Proceedings. Initiative Constitutional Amendment and Statute.

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June 15, 2016 - Presented to: Assembly Rules Committee and Senate Elections and Constitutional Amendments Committee

Overview of Property Assessed Clean Energy Programs

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June 9, 2016 - Presented to Assembly Local Government Committee and Assembly Banking and Finance Committee

LAO Multiyear State Budget Outlook

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May 20, 2016 - This online post is our office’s multiyear outlook for California’s General Fund through 2019-20 based on current state law and policies, as modified by the Governor’s May Revision proposals. This is part of our response to the Governor’s 2016-17 May Revision. Our outlook estimates the state will end 2016-17 with $8.7 billion in total reserves. Over our outlook period, and assuming continued economic growth, we estimate the state’s budget has the capacity to pay for the Governor’s May Revision proposals over the period. After 2016-17, the state would have a few billion dollars available each year to build reserves or make additional commitments. Despite these budgetary surpluses, compared to other recent similar analyses, our outlook shows much smaller budget surpluses. Surpluses have declined largely as a result of new spending commitments by the state, including the increased state minimum wage. As a result, the state’s budget is now more vulnerable to a future economic downturn than it was last year. For this reason, we suggest the Legislature aim to pass a state budget with a robust level of total reserves this year.

Proposed Reserves in the Governor’s May Revision

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May 17, 2016 - In the May Revision, the Governor proposes ending 2016-17 with $8.5 billion in total state General Fund reserves. This total reserve level is down $1.7 billion from January, but still represents an increase of about $4 billion over the level assumed in the 2015-16 budget plan. This online post provides more details about the breakdown of these funds in the Budget Stabilization Account (BSA) and Special Fund for Economic Uncertainties (SFEU).

The 2016-17 May Revision: LAO Analyses

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May 15, 2016 - As our office publishes responses to the Governor's 2016-17 May Revision, we will add them to this index page.

The 2016-17 Budget: Initial Comments on the Governor’s May Revision

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May 15, 2016 - In the May Revision, the Governor proposes ending 2016-17 with $8.5 billion in total state General Fund reserves. This level of reserves is about $1.7 billion lower than the level proposed by the Governor in January, which largely reflects a downward revision in revenue estimates since then, as well as increased required spending on K-14 education. Nevertheless, estimated tax revenues continue to exceed proposed spending in 2016-17, which would facilitate total reserves ending 2016-17 at $4 billion above the level assumed in the state's 2015-16 budget plan. Since January, the state has made budgetary commitments that represent substantial new ongoing costs for the state. These include: (1) an increase in the statewide minimum wage, (2) augmentations for health and human service programs, and (3) increased costs associated with new collective bargaining agreements. These commitments, along with the lower estimates of revenues and reserves, mean there is now less capacity than there was in January for additional budgetary commitments. Given these developments, and at this point in a mature economic expansion, we think it would be prudent to pursue a target for total reserves that is at least as large as the $8.5 billion amount in the Governor’s revised budget.

The 2016-17 Budget: The Governor’s Proposition 2 Debt Proposal

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February 24, 2016 - In this report, we analyze the administration’s proposal for meeting Proposition 2 debt payment requirements in 2016-17 and beyond. We find the administration’s proposal focuses on paying down low-interest debts that benefit schools and potentially benefit special fund fee payers. We suggest an alternative approach that could save taxpayers billions of dollars more over the long run. It would also allow the state to begin addressing more of its retirement liabilities sooner. Our approach focuses on high-interest debts that the state is otherwise not addressing. Specifically, we suggest the Legislature prioritize: (1) the state’s pension system for judges and (2) retiree health benefits for state and California State University employees.

The 2016-17 Budget: The Governor’s Reserve Proposal

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February 19, 2016 - In this publication, we summarize the administration’s estimate for constitutionally required reserve deposits in this year’s budget process. We then analyze the administration’s strategy for building additional reserves. While we concur with the Governor’s overall approach of building a robust level of total reserves, we find that his proposal to deposit optional amounts into the state’s rainy day fund would limit legislative control.