California Black Media

LAO Releases Multi-Year Outlook: Modest Budget Deficits to Persist

The state budget deficit is projected to increase, which will require the Governor and Legislature to make more budget cuts over the next few years, California’s non-partisan Legislature Analyst’s Office (LAO) stated in a report last week. According to the LAO’s multiyear budget report that makes forecasts about the state’s general fund through the 2027-28 fiscal year, the state’s budget problem is $7 billion higher than expected due to lower revenue and spending estimates.

Published

6 months ago

June 11, 2024

Oakland Post

iStock

By California Black Media

According to the LAO’s multiyear budget report that makes forecasts about the state’s general fund through the 2027-28 fiscal year, the state’s budget problem is $7 billion higher than expected due to lower revenue and spending estimates.

“Under our office’s revenue and spending projections, and assuming the Governor’s May Revision policies are adopted, the budget problem for this year is $7 billion larger,” the report reads. “Put another way, the Legislature would need to take $7 billion in additional budget actions to balance the budget.”

This shortfall requires the Governor to reduce government spending by an additional $7 billion to balance the state’s deficit. However, if the legislature does approve the governor’s May Revisions the budget problems will carry over into the 2025-2026 fiscal year, increasing the existing budget deficit by nearly $10 billion.

California’s budget deficit could be as high as $73 billion, requiring the Legislature to consider harsh budget buts that can help the state economy recover long-term. However, the LAO’s spending estimates are lower than that of the state’s Department of Finance.

“The main reason that our estimates of the state’s operating deficits are slightly smaller than the administration’s is that our estimate of General Fund spending is lower than the administration’s estimates,” stated the LAO in the multiyear budget report.

The LAO’s estimates exclude spending on schools and community colleges, and lower estimated expenditures for Health and Human Services (HHS) programs. Based on the LAO’s estimates, Health programs grow annually by an average of 5.1 percent compared to the Newsom Administration’s estimated 8 percent.

“Our office has little insight into the components of, or assumptions underlying, the administration’s projections in HHS. As a result, we cannot identify the precise source of these differences—or the comparative reliability of our respective estimates — with confidence,” the LAO report stated.

Given the projections, the LAO recommends that the Legislature maintain an overall structure similar to the Governor’s May revisions in the final budget package.