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


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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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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 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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[PDF] The 2022-23 Budget: Fiscal Outlook for Schools and Community Colleges

November 17, 2021 - Each year, the state calculates a “minimum guarantee” for school and community college funding based upon a set of formulas established by Proposition 98 (1988). Based upon revenue projections that are significantly above the June 2021 estimates, we estimate the guarantee in 2022‑23 is $11.6 billion (12.4 percent) above the 2021‑22 enacted budget level. After accounting for various adjustments—backing out one‑time expenditures, funding a 5.35 percent cost‑of‑living adjustment, and making required reserve deposits—we estimate that $9.5 billion is available for new commitments. In addition, we estimate that $10.2 billion in one‑time funding is available due to increases in the guarantee in 2020‑21 and 2021‑22. In total, we estimate nearly $20 billion is available to allocate in the upcoming budget cycle. To help the Legislature prepare to allocate this funding, we outline several options that would build upon existing programs, expand services in targeted ways, and address future costs and uncertainties.

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California Community Colleges—Managing Cash in a Time of State Payment Deferrals

December 18, 2020 - To help address the state’s large budget deficit as estimated in June 2020, the 2020-21 budget package deferred a substantial amount of General Fund payments to schools and the California Community Colleges (CCC). In this post, we (1) provide background on community college cash flow and cash management, (2) describe the community college deferrals included in the state’s 2020-21 budget package, (3) explain how the CCC Chancellor’s Office is implementing these deferrals, (4) discuss how community college districts are responding, and (5) present options for the Legislature to consider, particularly given the improved budget outlook.

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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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The 2020-21 Budget: School District Budget Trends

January 21, 2020 - In this report, we examine district budgets—both looking back at actual experiences to date and looking ahead at what experiences could be over the next few years. First, we provide background on districts and their budgets. We then discuss trends in districts’ main cost drivers. Next, we examine overall district fiscal health, with a particular focus on districts in fiscal distress. In the final section, we identify some ways the Legislature could help school districts address their cost pressures moving forward.

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[PDF] The 2025‑26 Budget: Fiscal Outlook for Schools and Community Colleges

November 20, 2024 - In this report, we provide our estimates of the guarantee and analyze the implications for school and community college budgeting.

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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: 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 2019-20 Budget: California Spending Plan (Final Version)

October 17, 2019 - Each year, our office publishes California Spending Plan, which summarizes the annual state budget. In July, we published a preliminary version of the report. This, the final version, provides an overview of the 2019‑20 Budget Act, then highlights major features of the budget approved by the Legislature and signed by the Governor. In addition to this publication, we have released a series of issue‑specific, online posts that give more detail on the major actions in the budget package.

Correction (10/29/19): Figure 4 total.

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[PDF] The 2023-24 Budget: Fiscal Outlook for Schools and Community Colleges

November 16, 2022 - Each year, the state calculates a “minimum guarantee” for school and community college funding based upon a set of formulas established by Proposition 98 (1988). Based upon recent signs of weakness in the economy, we estimate the guarantee in 2023‑24 is $2.2 billion (2 percent) below the 2022‑23 enacted budget level. Despite this drop, $7.6 billion would be available to provide increases for school and community college programs. In 2023‑24, the available funding could cover a cost‑of‑living adjustment (COLA) of up to 8.38 percent, which is slightly below our estimate of the statutory rate (8.73 percent). Over the next several years, growth in the guarantee and required reserve withdrawals would be just enough to cover the statutory COLA. Given this relatively precarious balance, we outline a few ways the Legislature could create a larger cushion to protect against revenue declines in the future.

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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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Excess ERAF: A Review of the Calculations Affecting School Funding

March 6, 2020 - This report focuses on a state law enacted in the 1990s that shifts some of the property tax revenue in certain counties from schools and community colleges to other local agencies. For historical reasons, the shifted revenue is known as “excess ERAF.” (The acronym refers to the local accounts—known as Educational Revenue Augmentation Funds—that facilitate the shift.) We recently found that some counties are calculating excess ERAF in ways that seem contrary to state law and shift too much property tax revenue from schools to other agencies. We have three specific concerns related to the calculation of excess ERAF that together affect about $350 million in annual property tax revenue. Earlier this year, the Newsom administration began to address one of these concerns. In this report, we recommend the Legislature direct the administration to enforce state law on our other two concerns. We also recommend improving oversight to prevent similar issues from arising in the future.