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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.
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.
January 11, 2016 - This publication is our office’s initial response to the 2016-17 Governor’s Budget proposal. Estimates of state personal income taxes and required school funding are up significantly. In allocating discretionary resources in the 2016-17 budget, the Governor prioritizes growing state budget reserves. Specifically, he increases total reserves to more than $10 billion and also allocates a sizable portion of discretionary resources to one-time infrastructure spending. We encourage the Legislature, as it crafts this year’s budget in line with its own priorities, to begin with a robust target for reserves for the end of 2016-17 and to concentrate spending on one-time purposes. This would still leave some funds available for targeted ongoing commitments—particularly if the Legislature extends the managed care organization (MCO) tax. Such a measured approach would better position the state for any near-term economic downturn.
January 1, 2016 - An index of publications on the 2016-17 budget.
December 3, 2015 - On November 18th, we released the 21st annual edition of our Fiscal Outlook, which projects California’s state budget condition through 2019-20 under a few different economic scenarios. This note provides the calculations and assumptions underlying the report’s estimates on Proposition 2 (2014), which changed the state’s budgeting practices concerning reserves and debt payments. Specifically, this note details the calculations we used to estimate the first 2015-16 “true up” deposit into the state’s rainy day fund.
December 2, 2015 - On November 18th, we released the 21st annual edition of our Fiscal Outlook, which projects California’s state budget condition through 2019-20 under a few different economic scenarios. This note provides the calculations and assumptions underlying the report’s estimates on Proposition 2 (2014), which changed the state’s budgeting practices concerning reserves and debt payments. Specifically, this note provides a high-level overview of our estimates of Proposition 2’s debt and reserve requirements in 2015-16 and 2016-17.
November 18, 2015 - Our Fiscal Outlook publication today discusses various near-term budget risks for the state related to pensions and retiree health. (See pages 43-45 of the pdf version of the report.) This note is an addendum to the Fiscal Outlook to reflect some recent developments concerning the California Public Employees' Retirement System (CalPERS).
November 18, 2015 - California's state budget is better prepared for an economic downturn than it has been at any point in decades. Under the main economic scenario in this year's LAO Fiscal Outlook, 2016-17 would end with reserves of $11.5 billion, assuming the state makes no new budget commitments through next year. If the economy continues to grow through 2019-20, annual operating surpluses and larger reserves could materialize, and there may be capacity for some new budget commitments—whether spending increases or tax reductions. An economic or stock market downturn, however, could occur during our outlook period. To illustrate this economic uncertainty, we provide projections under alternative scenarios such as a hypothetical recession that causes budget deficits to re-emerge. The more new budget commitments are made in 2016-17, the more likely it is that the state would face difficult choices—such as spending cuts and tax increases—later.
November 16, 2015 - This infographic presents information about the current state budget (2015-16) and compares the level of spending and revenues assumed in the current budget to historical levels since 1950-51. As a share of personal income—one broad measure of the size of the California economy—state spending has been relatively flat since the late 1970s. Spending on health and human services and corrections programs has generally increased over the period, while spending on higher education and transportation programs has generally decreased. Since 1950-51, the personal income tax has replaced the sales and use tax as the predominant source of General Fund revenue.
October 19, 2015 - Each year, the Legislative Analyst's Office publishes its Spending Plan publication to summarize the state's annual budget. Passed in June 2015, with various amendments later during the year's legislative session, the state's 2015-16 spending plan includes a large increase in funding for schools and community colleges. The budget makes augmentations to child care and preschool, higher education, and various health and human services programs. The plan also creates a new state earned income tax credit to increase the after-tax income of low-income workers.
July 17, 2015 - Statements of legislative intent and requests for studies adopted during deliberations on the 2015-16 budget package.
June 19, 2015 - We have provided information on the major provisions of the budget plan passed by the Legislature on Friday, June 19. (It does not reflect potential gubernatorial vetoes.) We will provide a more comprehensive summary of the budget plan in our annual California Spending Plan later this summer.
June 19, 2015 - We have provided information on the major provisions of the budget plan passed by the Legislature on Friday, June 19. (It does not reflect potential gubernatorial vetoes.) We will provide a more comprehensive summary of the budget plan in our annual California Spending Plan later this summer.
May 15, 2015 - Unlike prior years in which we produced an Overview of the May Revision publication, this year we plan to release our assessment of the Governor’s May Revision in various products that will be found on this index page.
April 7, 2015 - This report provides a preview of possible budgetary outcomes that the state’s elected leaders may face while finalizing the 2015–16 budget package in May and June. We do not produce a new revenue or budget outlook in this report. Rather, we consider the key factors that will affect May estimates. In general, this report’s scenarios discuss revenues and spending relative to the administration’s January 2015 budget estimates.