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Building Reserves to Prepare for a Recession


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The 2019-20 Budget: California's Fiscal Outlook

November 14, 2018 -

The budget is in remarkably good shape. Under our estimates of revenues and spending, the state’s constitutional reserve would reach $14.5 billion by the end of 2019-20. In addition, we project the Legislature will have nearly $15 billion in resources available to allocate in the 2019-20 budget process. The Legislature can use these funds to build more reserves or make new one-time and/or ongoing budget commitments.

The longer-term outlook for the state also is positive. Under our economic growth scenario, the state would have operating surpluses averaging around $4.5 billion per year (but declining over time). Under our recession scenario, the state would have enough reserves to cover a budget problem—provided the Legislature used all of the available resources in 2019-20 to build more reserves.

Along with the Fiscal Outlook, you can find a collection of other fiscal outlook material on our fiscal outlook budget page.

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The 2018-19 May Revision: LAO Multiyear State Budget Outlook

May 17, 2018 - This post presents our office’s outlook for the condition of the state’s General Fund through 2021-22 based on the Governor’s 2018-19 May Revision proposals.

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A History of California’s Budget Reserves

March 24, 2017 - This post provides an overview and history of the state’s budget reserves. It also includes an interactive graphic comparing actual reserves to enacted reserves over time.

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The 2019-20 Budget: Proposition 98 Outlook

November 14, 2018 - In this report, we examine how the minimum guarantee might change over the next several years and discuss the factors likely to be driving those changes. We then examine key aspects of district budgets—focusing on the main cost pressures facing districts over the next several years.

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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[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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[PDF] The 2015-16 Budget: Possible May Revision Scenarios

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.

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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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The 2017-18 Budget: Initial Comments on the Governor’s May Revision

May 13, 2017 - On May 11, 2017 the Governor presented his 2017-18 May Revision budget proposal to the Legislature. We are releasing our assessment of the May Revision in various online products. This post describes the major features of the Governor’s May Revision and our office’s initial comments on it. Other posts in this series discuss our office’s independent assessments of the state’s economy, revenues, and spending proposals in the May Revision.

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The 2019-20 Budget: Overview of the Governor's Budget

January 14, 2019 - This report presents our office’s initial assessment of the Governor’s Budget. The budget’s position continues to be positive. With $20.6 billion in discretionary resources available, the Governor’s budget proposal reflects a budget situation that is even better than the one our office estimated in the November Fiscal Outlook. The Governor’s Budget allocates nearly half of these discretionary resources to repaying state liabilities. Then, the Governor allocates $5.1 billion to one-time programmatic spending, $3 billion to reserves, and $2.7 billion to ongoing spending. Although the Governor’s allocation to discretionary reserves represents a smaller share of resources than recent budgets, the Governor’s decision to use a significant share of resources to pay down state debts is prudent. The Governor’s ongoing spending proposal is roughly in line with our November estimate of the ongoing capacity of the budget under an economic growth scenario. This was just one scenario, however. Recent financial market volatility indicates revenues could be somewhat lower than either we or the administration estimated.

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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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The 2018-19 Budget: California Spending Plan (Final Version)

October 2, 2018 - Each year, our office publishes the California Spending Plan to summarize the annual state budget. This publication discusses the 2018‑19 Budget Act and other major budget actions approved in 2018. This version reflects all budgetary legislation related to the 2018-19 Budget Act.

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The 2014-15 Budget: Overview of the Governor's Budget

January 13, 2014 - On January 9, the Governor presented a budget package with a proposed $2.3 billion reserve at the end of 2014-15. The Governor's budget seeks to address some of California's biggest budget issues. The Governor's emphasis on debt repayment is prudent, and his proposal for a new rainy-day fund requirement underscores the importance of regular state contributions to a larger budget reserve. Overall, the Governor's budget plan would place the state on an even stronger fiscal footing.

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The 2018-19 Budget: Proposition 98 Outlook

November 15, 2017 - Proposition 98 (1988) establishes a minimum annual funding requirement for schools and community colleges. In this report, we (1) explain how our estimates of the minimum requirement have changed since the adoption of the June budget plan, (2) identify the new funding available in 2018-19, and (3) highlight a few key trends affecting schools and community colleges over the next four years.

This is part of a collection of material for The 2018-19 Budget: California’s Fiscal Outlook. See a complete list of this year's fiscal outlook material on our fiscal outlook budget page.

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The 2018-19 Budget: Hastings College of the Law

February 15, 2018 - In this report, we provide an overview of the Governor’s proposed budget for Hastings College of the Law, describe the school’s proposed spending plan, assess that plan, and offer an associated recommendation.