Report: California’s finances much improved
November 14, 2012
• Budget surpluses seen soon
• “This outlook differs dramatically from the severe operating deficits we have forecast … over the past decade”
California's budget situation has improved sharply thanks to the state's economic recovery, prior budget cuts and the additional, temporary taxes provided by Proposition 30, says a new report Wednesday from the nonpartisan Legislative Analyst’s Office.
Circumstances have combined to bring California to a promising moment: the possible end of a decade of acute state budget challenges, the report says.
It means California's leaders face a dramatically smaller budget problem in 2013-14 compared to recent years, the LAO report says.
“Furthermore, assuming steady economic growth and restraint in augmenting current program funding levels, there is a strong possibility of multibillion-dollar operating surpluses within a few years,” it says.
The current state budget assumed a year-end reserve of $948 million but the LAO’s forecast now projects the General Fund ending 2012-13 with a $943 million deficit, due to the net impact of $625 million of lower revenues in 2011-12 and 2012-13 combined, $2.7 billion in higher expenditures (including $1.8 billion in lower-than-budgeted savings related to the dissolution of redevelopment agencies), and an assumed $1.4 billion positive adjustment in the 2010-11 ending budgetary fund balance.
Mac Taylor, head of the office, says he also expects that California faces a $936 million operating deficit under current policies in 2013-14.
“These estimates mean that the new Legislature and the Governor will need to address a $1.9 billion budget problem in order to pass a balanced budget by June 2013 for the next fiscal year,” he says.
That’s expected to be much easier since, for the first time since 1933, Democrats hold a “super majority” in both the Assembly and state Senate. Republicans had been able to block budgets and tax measures when they held enough seats to prevent a super majority.
But better times may be ahead, Mr. Taylor says.
“Based on current law and our economic forecast, expenditures are projected to grow less rapidly than revenues. Beyond 2013-14, we therefore project growing operating surpluses through 2017-18,” he says. “Our projections show that there could be an over $1 billion operating surplus in 2014-15, growing thereafter to an over $9 billion surplus in 2017-18.
“This outlook differs dramatically from the severe operating deficits we have forecast in November Fiscal Outlook reports over the past decade,” he says.