May 16, 2022 - On May 13, 2022, Governor Newsom presented a revised state budget proposal to the Legislature. (This annual proposed revised budget is called the “May Revision.”) In this brief, 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. The information presented in this brief is based on our best understanding of the administration's proposals as of 11:00 AM, May 14, 2022. In many areas of the budget, this understanding will continue to evolve as we receive more information. We only plan to update this brief for very significant changes (that is, those greater than $500 million).
Update (5/20/22): Updated to reflect information about state appropriations limit (SAL) excluded spending and other budget proposals.
May 24, 2022 - This brief presents our office’s independent assessment of the condition of the state General Fund budget through 2025-26 under our forecast of revenues and spending, assuming the Governor’s May Revision policies were adopted.
November 17, 2021 - Our annual Fiscal Outlook publication gives our office’s independent assessment of the California state budget condition for the upcoming fiscal year and over the longer term. In this report, we anticipate the state will have a $31 billion surplus to allocate in the upcoming fiscal year and operating surpluses ranging from $3 billion to $8 billion over the multiyear period. We also find the state will need to allocate about $14 billion to meet the constitutional requirements of the State Appropriation's Limit (SAL) across 2020-21 and 2021-22.
April 21, 2021 - This report: (1) describes how appropriations limits work for the state, school districts, and local governments in California; (2) explains why the limit is a constraint for state government; and (3) concludes with a variety of short- and long-term policy options—both of which we think the Legislature will need to take—in response to the issue.
May 23, 2021 - This report presents our office’s independent assessment of the condition of the state General Fund budget through 2024-25 assuming the economy continues to grow. While the state faces a historic surplus, a spending level beyond what is proposed by the Governor would require the Legislature to identify proposals to reject. Moreover, our analysis finds that the level of ongoing spending proposed by the Governor is only supportable with a revenue forecast that is more optimistic than the administration’s current estimates.
November 16, 2022 - Our annual Fiscal Outlook publication gives our office’s independent assessment of the California state budget condition for the upcoming fiscal year and over the longer term. In this report, we anticipate the state will have a $24 billion budget problem to solve in the upcoming fiscal year and operating deficits declining from $17 billion to $8 billion over the multiyear period. The goal of this report is to help the Legislature begin crafting the 2023‑24 budget. Our analysis relies on specific assumptions about the future of the state economy, its revenues, and its expenditures. Consequently, our estimates are not definitive, but rather reflect our best guidance to the Legislature based on our professional assessments as of November 2022.
Update (11/22/22): The original version of this report identified a $25 billion—instead of a $24 billion—budget problem, which reflected an error in the way we accounted for student housing grant program funding.
March 2, 2017 - Under the State Constitution, state tax revenues in excess of the Prop 4 (1979) state appropriations limit, or Gann Limit, must be split between taxpayer rebates and additional school spending. The Governor now proposes a new calculation methodology that creates $22 billion in additional state spending capacity. We find that the Governor's proposal violates the spirit of Proposition 4 and—in our view—is highly vulnerable to legal challenges. We recommend that the Legislature reject the proposal and offer options for legislative consideration.
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).
November 15, 2017 - The near-term budget outlook is positive. Under our current estimates, the state would have $19.3 billion in total reserves (including $7.5 billion in discretionary reserves) at the end of 2018-19, assuming the Legislature makes no additional budget commitments. The Legislature can use discretionary resources to build more budget reserves, increase spending, and/or reduce taxes. We also estimate the Legislature will have $5.3 billion in uncommitted school and community college (Proposition 98) funds to allocate in 2018-19. We provide more detail on our estimates of Proposition 98 funding in a separate report accompanying this outlook. The state has made significant progress in preparing for the next recession. To assess the longer-term budget outlook, we present two illustrative economic scenarios for fiscal years after 2018-19. Under a moderate recession scenario, the state has enough reserves to cover its deficits until 2021-22, assuming the Legislature makes no additional budget commitments. Additional budget commitments in the near term could cause the state to exhaust its reserves earlier in the next recession
This year, our Fiscal Outlook includes this report and a collection of other fiscal outlook material on our fiscal outlook budget page.
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.
February 4, 2022 - This post provides our office’s initial analysis on and comments about the Governor’s proposals to address state appropriations limit (SAL) requirements in the 2022-23 Governor’s budget.
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.