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Economy and Taxes Publications

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Handout

Governor’s Budget-Related Reforms

March 3, 2005 - Presented to the Assembly Budget Process Committee on March 2, 2005.

Handout

California's Tax Gap

March 1, 2005 - Senate Budget and Fiscal Review Committee.

Report

Perspectives on State Revenues 2005-06

February 22, 2005 - The current strength in the economy is translating into solid growth in receipts from the state's taxes—particularly the corporate tax and personal income tax. Recent cash receipts trends have been even stronger than anticipated in the Governor's budget, mainly because of strong 2004 year-end collections from the personal income tax and corporation tax. Based largely on these positive trends, we project that General Fund revenues will exceed the budget forecast by $1.4 billion in the current year and $765 million in the budget year.

Report

Perspectives on the Economy and Demographics 2005-06

February 22, 2005 - The California economy is expanding at a healthy pace in early 2005, as evidenced by real estate construction, exports, company reports of sales and profits, and business-related tax receipts. The one area of concern remains jobs, which are lagging due to intense focus on cost cutting and efficiencies. We project the California economic expansion to continue at a moderate pace, with personal income expanding by roughly 5.6 percent and jobs growing 1.5 percent annually during the next two years.

Report

State Fiscal Picture 2005-06

February 22, 2005 - The Legislature has an important budget opportunity. We project that revenues are $2.2 billion higher (for the current and budget years combined) than reflected in the Governor's budget. This, combined with the magnitude of ongoing solutions proposed in the budget plan, would result in a balanced 2005-06 budget with a solid reserve. However, the price of inaction is significant. Without the adoption of ongoing solutions of the magnitude offered by the budget plan, the 2005-06 budget would be precariously balanced and the state would experience major budget shortfalls in 2006-07 and beyond. These shortfalls would be close to $10 billion.

Report

2005-06 Budget: Perspectives and Issues

February 22, 2005 - The Legislature has an important budget opportunity. We project that revenues are $2.2 billion higher (for the current and budget years combined) than reflected in the Governor's budget. This, combined with the magnitude of ongoing solutions proposed in the budget plan, would result in a balanced 2005-06 budget with a solid reserve. However, the price of inaction is significant. Without the adoption of ongoing solutions of the magnitude offered by the budget plan, the 2005-06 budget would be precariously balanced and the state would experience major budget shortfalls in 2006-07 and beyond. These shortfalls would be close to $10 billion.

Report

Governor's Budget-Related Reforms

February 22, 2005 - The Governor has proposed constitutional reforms involving several areas of the budget—including Proposition 98 K-14 education funding, the budget process, and transportation. The Governor has indicated that the main purpose of the reforms is to deal with "autopilot spending" and instill discipline in future budgets. We believe, however, that the administration's specific proposals work in exactly the opposite direction. That is, they would put more spending on autopilot and make it more difficult to balance future budgets in a rational way. The changes would also result in a diminution of legislative authority.

Handout

California’s Tax System and the Economy

February 2, 2005 - Presented to the Senate Committee on Revenue and Taxation

Report

Revenue Volatility In California

January 20, 2005 - Following the boom-bust revenue cycle in recent years, concerns have developed about volatility in California's General Fund revenues. This brief quantifies the amount of revenue volatility experienced in California during the past quarter century, identifies the main causes of the volatility, and discusses the outlook for volatility in the future. We also highlight some options for reducing future impacts of volatility—both those involving changes to the tax system and budgetary changes—and discuss the trade-offs inherent in each of the alternatives.

Report

Tax Agency Consolidation: Remittance and Return Processing

January 10, 2005 - The physical consolidation of remittance and return processing activities of the Franchise Tax Board, the Board of Equalization, and the Employment Development Department would likely result in some savings in the medium and long term. It would also require a significant investment of funds in the near term in order to make such a consolidation feasible. Expanding the opportunities for electronic processing at all three agencies provides an alternative means of achieving savings in the long term while improving tax agency performance at the same time.

Report

Additional Options for Addressing the State’s Fiscal Problem

February 18, 2004 - In this piece, we present options for the Legislature's consideration. We have identified expenditures that may be considered of lower priority in tough budget times. It is not that these activities are without merit or not desirable. In better fiscal times we would not necessarily put such options on the table. However, we offer them in the context of a need to solve a massive budget shortfall. We have also identified selected revenue options for the Legislature's consideration. These options generally involve tax expenditure programs which are either inefficient at achieving their objectives or are not the most efficient means of doing so.

Report

The Problem of Abusive Tax Shelters

February 18, 2004 - The current level of abusive tax shelters (ATS) activity—and its potential for future expansion—raises significant administrative challenges for FTB and for the continued viability of the state's revenue system. The use of ATSs not only results in significant immediate term revenue losses to California—in the hundreds of millions of dollars annually—but can also result in declining compliance by an increasing number of taxpayers over the longer term. While the Legislature has taken important steps to curtail the use of ATSs, it may want to consider additional measures in this regard. This discussion provides an overview of the ATS phenomenon, addresses the impacts of such shelters on the state, and suggests measures the Legislature may want to consider to address the ATS problem.

Report

Another Property Tax Shift?

February 18, 2004 - Similar to the 1990s, the budget proposes to shift $1.3 billion of property taxes from local governments to K-14 districts and reduce state education spending by an equal amount. In our view, the Legislature should use its authority over this tax for the overall betterment of local government, not as a state rainy day fund. Accordingly, we recommend the Legislature reject this proposal. If the Legislature chooses to review proposals to reduce local taxes, we offer guidelines for this process and outline an alternative budget reduction consistent with these guidelines. While this alternative also represents an undesirable intrusion into local finance, it would have fewer negative effects.

Report

The 2004-05 Budget: Perspectives and Issues

February 18, 2004 - Perspectives on the state's fiscal condition and the budget proposed by the Governor for 2004-05.

Report

State Fiscal Picture 2004-05

February 18, 2004 - The basic budget problem currently facing the state involves an unfunded gap of slightly over $17 billion. Most of this—$15 billion—represents an ongoing projected structural imbalance between current-law revenues and expenditures in 2004-05 and beyond. A key element of the Governor's plan is the assumed approval of a $15 billion economic recovery bond on the March 2004 statewide ballot to pay off the accumulated 2002-03 budget deficit and help address the remaining budget shortfall. Our own evaluation of the proposal indicates that even if all of its elements were adopted, 2004-05 would end with a General Fund deficit of $0.8 billion. We further project that an ongoing General Fund structural deficit of close to $7 billion would exist beyond the budget year, absent corrective action.

Economy and Taxes Staff

Chas Alamo
(916) 319-8357
Personal Income Tax, Employment, and Labor Law
 
Ross Brown
(916) 319-8345
Property Taxes, Bonds, and the Economy
 
Ann Hollingshead
(916) 319-8305
State Budget and Federal Funding
 
Nick Schroeder
(916) 319-8314
Public Employment, CalPERS, Elections, Veterans Affairs
 
Brian Uhler
(916) 319-8328
Deputy Legislative Analyst: Economy, Taxes, and Labor
 
Seth Kerstein
(916) 319-8365
Sales and Excise Taxes and Demographics