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Fiscal Outlook Supplement on Proposition 2: Overview


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Fiscal Outlook Supplement on Proposition 2

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.

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Fiscal Outlook Supplement on Proposition 2: True Up Calculations

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.

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[PDF] The 2016-17 Budget: The Governor’s Reserve Proposal

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.

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Evolution of the Balance of the Budget Stabilization Account

November 14, 2018 - This post discusses the various types of deposits the Legislature has made into the Budget Stabilization Account (BSA) that now compose its balance. We also present our projections of the estimated balance in the BSA under our recently published report, The 2019-20 Budget: California’s Fiscal Outlook.

In addition to this report, you can find the main California's Fiscal Outlook report along with a collection of other fiscal outlook material on our fiscal outlook budget page.

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The 2021-22 Budget: The Governor’s Proposition 2 Proposals

April 26, 2021 - This post provides an overview of the Governor’s proposals related to Proposition 2 (2014). We provide background on how the measure works, and then summarize and comment on the Governor’s Proposition 2 reserve and debt payment proposals.

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Proposed Reserves in the Governor’s May Revision

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).

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[PDF] The 2015-16 Budget: The Governor's Proposition 2 Proposal

March 25, 2015 - Proposition 2—approved by the voters in November 2014—places formulas into the State Constitution that determine the minimum amount of debt payments and budget reserve deposits to be made in a fiscal year. This publication analyzes the administration’s Proposition 2 proposal outlined in the 2015-16 Governor’s Budget. We recommend that the Legislature develop a long-term plan for Proposition 2 and suggest that the Legislature solicit proposals from the administration, state pension systems—including CalPERS, CalSTRS, and the UC Regents—and others concerning the benefits of applying Proposition 2 debt payment funds toward eligible liabilities. In addition, we note that, as of the Governor's January budget proposal, the administration's Proposition 2 plan for 2015-16 pays down more debt than required under the measure.

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

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.

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Long-term Capacity for Debt Payments Under Proposition 2

December 21, 2017 - Our recent Fiscal Outlook publication considers potential future requirements under Proposition 2 (2014)—including required rainy day fund deposits and payments toward certain state debts. Some have asked whether Proposition 2 debt funding payments can be used to reduce liabilities of teacher and other public employees' pension plans. As we discuss in this post, there may be little ongoing capacity to make additional commitments from Proposition 2 debt funding payments through the mid-2020s.

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[PDF] The 2017-18 Budget: Alternatives to the Governor’s Proposition 2 Proposals

February 23, 2017 - Proposition 2 (2014) requires the state to make: (1) minimum annual payments toward certain eligible debts and (2) deposits into the state’s rainy day fund. This publication outlines alternatives to the Governor’s proposals that could free up General Fund resources. It also addresses whether the Legislature can access funds from state’s rainy day reserve under the measure’s budget emergency provisions.

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The 2016-17 Budget: California Spending Plan

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.

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[PDF] Building Reserves to Prepare for a Recession

March 7, 2018 - Reserves are of critical importance to the health of the state's budget. These funds help cushion the impact of a budget problem that emerges during a recession. In this report, our office provides an overview of revenue losses that have occurred in past recessions to consider the magnitude of a budget problem that could emerge in the future. Then, we describe the Governor's reserve proposal for 2018-19 and compare this level to past reserves and other states. Next, to aid the Legislature as it evaluates the Governor’s proposal, we present a framework that the Legislature can use to plan for a recession and determine a target level of reserves. Finally, we conclude with our office’s comments on the Governor’s proposed level of reserves in light of this framework and present some alternatives for legislative consideration.

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The 2016-17 Budget: Overview of the Governor's Budget

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.