State Budget Condition Publications

Conference Committee Overview

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May 30, 2019 - Presented to the Budget Conference Committee

Amid Good Fiscal Times, Planning for the Future Is Crucial

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May 21, 2019 - Through the adoption of countercyclical fiscal policies, California is better able to navigate the business cycle within the constraints of its constitutional balanced budget requirement. The idea here is that in good times—when revenues are strong—the state spends somewhat below its capacity, sequestering the difference in reserves. Later, when the economy and tax receipts weaken, the state can draw upon its accumulated savings to fund a spending level above what revenues would otherwise support. Exercising spending restraint during good times promotes fiscal sustainability and dampens the need for austerity in subsequent recessions, thus, facilitating policy stability. The more robust California’s countercyclical fiscal policies are, the more the state can avoid boom-and-bust budgeting, which most policymakers view as anathema.

The 2019-20 May Revision: Sales Tax Exemptions for Diapers and Menstrual Products

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May 12, 2019 - In the May Revision, the Governor has proposed two new sales tax exemptions that would go into effect on January 1, 2020 and expire on December 31, 2021: one for menstrual products and another for children’s diapers. These exemptions would apply to the full amount of the state and local sales tax. The Governor’s proposal would require our office to submit reports evaluating these exemptions by January 1, 2021.

The 2019-20 May Revision: Initial Comments on the Governor’s May Revision

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May 12, 2019 - The Governor’s revised budget package provides updates on the administration’s estimates of revenues (in part based on collections in April, the state’s most important revenue collection month). The Governor’s May Revision also revises some January budgetary proposals and introduces some new proposals. In this post, we provide a summary of the Governor’s revised budget, primarily focusing on the state’s General Fund—the budget’s main operating account.

Correction (5/14/19): Corrected sunset dates on certain Health and Human Services proposals.

The 2019-20 May Revision: LAO Revenue Outlook

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May 12, 2019 - This post details our General Fund revenue outlook for 2017‑18 through 2022‑23. Our estimates of General Fund revenues and transfers for the “budget window”—2017‑18 through 2019‑20—are $774 million (0.2 percent) above the administration’s May 2019 revenue forecast.

The 2019-20 May Revision: LAO Economic Outlook

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May 12, 2019 - Our office just released a summary of our updated state fiscal outlook for the May Revision. Our fiscal outlook is premised on a set of economic assumptions. While our November fiscal outlook included multiple economic scenarios, this update for May focuses on only one economic scenario: continuation of moderate economic growth.

The 2019-20 May Revision: Opportunity Zones

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May 11, 2019 - The Governor proposes to allow state tax benefits for investments in alternative energy or affordable housing in communities designated as Opportunity Zones under a new federal program. Given the mixed evidence regarding the benefits of similar policies and the existence of better mechanisms to fund affordable housing, we recommend rejecting the Governor’s proposal to create a state Opportunity Zone tax benefit.

The 2019-20 May Revision: LAO Analyses

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May 9, 2019 - As our office publishes responses to the Governor's 2019-20 May Revision, we will add them to this index page.

An Extraordinary Moment in California's Fiscal History

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April 11, 2019 - In this Fiscal Perspective post, the Legislative Analyst Gabriel Petek explains how and why—given the macroeconomic landscape—the Legislature may want to consider building larger reserves than what the governor proposed.

The 2019-20 Budget: Undoing California’s Outstanding Budgetary Deferrals

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March 26, 2019 - When facing budget problems in the past, the state has “deferred” payments from one fiscal year into the next, providing significant one-time budgetary savings. While the state has already addressed many of its outstanding deferrals, there are still three major categories of deferrals remaining. These are related to: (1) state employee payroll, (2) pension payments, and (3) Medi-Cal payments. The Governor proposes using $1.7 billion to undo the payroll and pension deferrals. We find this would improve the state’s fiscal position and moderately improve the state’s budgetary practices, however, this approach has shortcomings relative to alternatives. This post recommends an alternative approach to the Governor’s proposal.

The 2019-20 Budget: The Governor's Proposal for a New Office of Digital Innovation

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March 22, 2019 - In this post, we describe the Governor’s 2019-20 budget proposal to create a new office within California’s Government Operations Agency—the Office of Digital Innovation. We then provide issues for legislative consideration, including key questions about the office’s implementation and legislative oversight of its activities.

The Property Tax Postponement Program

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March 6, 2019 - The Select Committee on Social Determinants of Children’s Well-Being

Structuring the 2019-20 Budget: Reserves, Debt, and Liabilities

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March 5, 2019 - Assembly Budget Subcommittee No. 4 on State Administration

Structuring the 2019-20 Budget: Reserves, Debt and Liabilities

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February 7, 2019 - Presented to: Senate Budget and Fiscal Review Committee

The 2019-20 Budget: Structuring the Budget: Reserves, Debt and Liabilities

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February 5, 2019 - This report considers the overall structure of the Governor’s budget to evaluate how well it prepares the state to address a future budget problem. We begin with background to explain the state budget structure, budget problems, and options for addressing budget problems. We also provide background on the state’s existing reserves and debts and liabilities. We then present some key considerations as the Legislature considers its overall budget structure. Finally, we present and assess each of the Governor’s major budget reserve and debt and liability proposals and offer some alternatives for legislative consideration.

2/5/19: Corrected total of state spending deferrals in Figure 5.