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Evolution of the Balance of the Budget Stabilization Account


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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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[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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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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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 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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[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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Update on State and School District Reserves

April 5, 2020 - As the public health crisis related to COVID-19 has unfolded, the possibility of the state facing a budget problem seems increasingly likely. One key tool to address a budget problem is budget reserves. This post assesses the current reserve situation of the state and school districts—whose funding largely depends on the state.

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The 2024-25 Budget: California's Fiscal Outlook

December 7, 2023 - Each year, our office publishes the Fiscal Outlook in anticipation of the upcoming budget season. The goal of this report is to give the Legislature our independent estimates and analysis of the state’s budget condition as lawmakers begin planning the 2024-25 budget.

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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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[PDF] The 2022-23 Budget: Overview of the Governor's Budget

January 13, 2022 - On January 10, 2022, Governor Newsom presented his proposed state budget to the Legislature. In this report, we provide a brief summary of the proposed budget based on our initial review. In the coming weeks, we will analyze the plan in more detail and release several additional budget analyses.

Update (1/21/22): Includes a corrected estimate of Governor’s Budget proposals that are excludable under the State Appropriations Limit (SAL).

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[PDF] The 2020-21 Budget: Overview of the Governor's Budget

January 13, 2020 - This report presents our office’s initial assessment of the Governor’s budget. We estimate the Governor had a $6 billion surplus to allocate to discretionary purposes in 2020-21. The Governor allocates most of the surplus toward one-time purposes, including maintaining a positive year-end balance in the state’s discretionary reserve. Under the administration’s estimates, total reserves would reach $20.5 billion at the end of 2020-21—this represents a $1.7 billion increase from the 2019-20 enacted level. California continues to enjoy a healthy fiscal situation. Despite its positive near-term picture, the budget’s multiyear outlook is subject to considerable uncertainty. In addition to describing the condition of the budget under the Governor’s proposal, this report discusses tools the Legislature can use to mitigate against these heightened risks.

January 20, 2020: Upon further review, one item included in the original version of Appendix Figure 3 on discretionary on health spending should not have been included (specfically, use of the Medi-Cal drug rebate fund to offset General Fund costs). Removing this item—which reduces General Fund spending—from the list of discretionary choices made in the Governor’s budget increases our calculation of the surplus to $6 billion. The document is updated to reflect these changes.

Update 1/24/20: Adjusted Judicial Branch items in Appendix Figure 1 to reflect ongoing spending.

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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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[PDF] Budget Reserve Proposals

April 28, 2014 - Presented to the Legislature, this handout summarizes the key features of ACA 4—the rainy-day fund proposal currently on the November 2014 statewide ballot—and the Governor’s proposal for a different rainy-day fund mechanism. Revenue volatility presents a key challenge for state budgeting and the state has a poor track record of setting aside reserves when times are good to help balance the budget during later economic downturns. Designing another budgetary formula for the constitution involves implementation issues for legislative consideration.

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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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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.