LAO Releases First Snapshot Of California’s Upcoming Budget

The non-partisan California Legislative Analyst’s Office is projecting that California is facing a $2-billion shortfall this coming fiscal year.

It is the first snapshot analyzing revenues for the period that begins July 1st. It refers to the budget as “roughly balanced.”

It  states, “Despite softness in the state’s labor market and consumer spending, earnings of high‑income Californians have surged in recent months. Income tax collections have seen a similar bounce. This recovery in income tax revenues is being driven by the recent stock market rally, which calls into question its sustainability in the absence of improvements to the state’s broader economy.”

It is a much better scenario than this time one year ago when California was facing a $68-billion projected shortfall.

The LAO is urging lawmakers to use constraint when considering new spending, noting that there is “no capacity for new commitments.” The report adds, “While out‑year estimates are highly uncertain, we anticipate the Legislature likely will need to address deficits in the future, for example by reducing spending or increasing taxes. In our view, this year’s budget does not have capacity for new commitments, particularly ones that are ongoing.”

The full report can be found here.