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Update on State and School District Reserves


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[PDF] The 2019-20 Budget: May Revision Multiyear Budget Outlook

May 17, 2019 - This report presents our office’s independent assessment of the condition of the state General Fund budget through 2022-23 assuming the economy continues to grow and all of the Governor’s May Revision spending proposals are adopted.

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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: Structuring the Budget: Reserves, Debt and Liabilities

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.

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[PDF] The 2023-24 Budget: Overview of the Governor's Budget

January 13, 2023 - On January 10, 2023, 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.

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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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[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 2020-21 Budget: California's Spring Fiscal Outlook

May 8, 2020 - This report provides an update on the budget’s condition in light of the public health emergency and economic downturn associated with the coronavirus disease 2019. Our outlook presents two potential scenarios—a somewhat optimistic “U-shaped” recession and a somewhat pessimistic “L-shaped” recession—and assumes a baseline level of expenditures. Under these two scenarios, the state would have to address an $18 billion or $31 billion budget problem. The state’s newly emergent fiscal challenges are likely to extend well beyond the end of the public health crisis. Under both of our economic scenarios, budget deficits persist until at least 2023-24 with multiyear deficits summing to $64 billion in the U-shaped recession and $126 billion in the L-shaped recession.

Video: Press Availability Video Call

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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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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 2024-25 Budget: Initial Comments on the Governor’s May Revision

May 17, 2024 - On May 14, 2024, Governor Newsom presented a revised state budget proposal to the Legislature. This annual proposed revised budget is referred to as the May Revision. In this brief, we provide a summary of and comments on the Governor’s revised budget, focusing on the overall condition and structure of the state General Fund—the budget’s main operating account.

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[PDF] The 2020-21 Budget: Initial Comments on the Governor’s May Revision

May 17, 2020 - On May 14, 2020, Governor Newsom presented a revised state budget proposal to the Legislature. In this post, we provide an overview of the overall budget condition under the May Revision estimates and proposals; the major actions the Governor took to close an estimated $54 billion budget gap; and give our initial comments on this budget package.

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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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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 2020-21 Budget: Overview of the California Spending Plan (Final Version)

October 5, 2020 - Each year, our office publishes the California Spending Plan to summarize the annual state budget. This publication provides an overview of the 2020‑21 Budget Act, provides a short history of the notable events in the budget process, and then highlights major features of the budget approved by the Legislature and signed by the Governor. All figures in this publication reflect the administration’s estimates of actions taken through June 30, 2020, but we have updated the narrative to reflect actions taken later in the legislative session. In addition to this publication, we have released a series of issue‑specific posts providing more detail on various programmatic aspects of the budget.

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The 2021-22 Budget: Initial Comments on the Governor’s May Revision

May 17, 2021 - On May 14, 2021, Governor Newsom presented a revised state budget proposal to the Legislature. (This annual proposed revised budget is called the “May Revision.”) In this post, we provide a summary of the Governor’s revised budget, focusing on the overall condition and structure of the state General Fund—the budget’s main operating account. In the coming days, we will analyze the plan in more detail and provide additional comments in hearing testimony and online.

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[PDF] Budget Reserves and Debt Repayments Under Proposition 2

March 30, 2016 - Senate Budget Subcommittee No. 4 on State Administration and General Government