CSAC Bulletin Article

LAO Forecasts Good Times Ahead for the State Budget

The state budget is in remarkably good shape, according to the Legislative Analyst’s Office (LAO) 2019-20 Fiscal Outlook. In fact, the $15 billion projected surplus for 2019-20 is the largest on record by the LAO since they started producing Fiscal Outlooks in 1995.

In the near term, the LAO anticipates continued economic growth with overall revenues increasing by 5.5 percent in 2019-20, mainly from the personal income tax. Coupled with moderately low spending growth (assuming no change to current law and policies), the LAO estimates state additional discretionary resources would grow to $14.8 billion in 2019-20.

However, as the LAO notes, the state’s budget condition can change quickly and surpluses can easily disappear. The good news is that even in a recession scenario, assuming the Legislature doesn’t make any new commitments, the state has enough reserves to cover its deficits through 2022-23.

In addition to the general budget outlook, the LAO has released several reports specifically addressing health and human services, economics and taxes, reserves, and school funding (Prop 98). Counties will be particularly interested to read about the LAO’s fiscal outlook for In-Home Supportive Services and Medi-Cal. CSAC provides a summary of those reports elsewhere in this Bulletin.

County officials have an opportunity to hear about the state’s fiscal outlook at the 124th CSAC Annual Meeting, when LAO representative Lourdes Morales will present these findings to the CSAC Government Finance and Administration Policy Committee at their meeting on Thursday, November 29.

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