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


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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 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 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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[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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[PDF] The 2020-21 Budget: The Fiscal Outlook for Schools and Community Colleges

November 20, 2019 - This report examines how the Proposition 98 minimum guarantee might change over the coming years. The report has five parts. First, we explain the formulas that determine the minimum guarantee. We then explain how our estimates of Proposition 98 funding in 2018‑19 and 2019‑20 differ from the estimates included in the June 2019 budget plan. Next, we estimate the 2020‑21 guarantee. Fourth, we explain how the minimum guarantee could change through 2023‑24 under two possible economic scenarios. Finally, we identify the amount of funding that would be available for new spending commitments in the upcoming year and describe some issues for the Legislature to consider as it prepares to allocate this funding.

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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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: 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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The 2021-22 Budget: The Fiscal Outlook for Schools and Community Colleges

November 18, 2020 - This report provides our fiscal outlook for schools and community colleges. State budgeting for schools and the California Community Colleges is governed largely by Proposition 98. The measure establishes a minimum funding requirement for K‑14 education commonly known as the minimum guarantee. This report provides our estimate of the minimum guarantee for the upcoming budget cycle. (The 2021‑22 Budget: California’s Fiscal Outlook contains an abbreviated version of our Proposition 98 outlook, along with the outlook for other major programs in the state budget.)

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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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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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The 2020-21 Budget: Structuring the Budget

February 10, 2020 - California has made significant progress in recent years to make its budget more resilient. Yet the process of achieving resilience can never be considered finished. This report lays out a framework for evaluating the budget’s structure using two key tools: reserves and operating surpluses. Using this framework, we evaluate the Governor’s proposed 2020-21 budget structure. We find that building more reserves or preserving a larger operating surplus would be prudent.

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[PDF] The 2019-20 Budget: Analysis of the Department of Social Services Budget

February 22, 2019 - In this report, we evaluate the Governor's major human services budget proposals for programs administered by the Department of Social Services, including the California Work Opportunities and Responsibility to Kids (CalWORKs), the Supplemental Security Income/State Supplementary Payment (SSI/SSP), the In-Home Supportive Services (IHSS), and foster care.

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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 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).