Wednesday, November 14, 2018

State Budget Outlook

The Legislative Analyst's Office (LAO) has come out with its annual budget outlook publication. As the graphic shows, it posits two alternative scenarios: continued growth and recession roughly starting around the 2020-21 fiscal year.

If there are no new spending commitments - hard to imagine with a new governor and a legislature with a one-party supermajority - the state makes it through the supposed recession, drawing on its reserves. The state has two reserves: the regular general fund reserve and the "rainy-day" fund. The latter mainly scoops off revenue and rechannels it into saving and/or debt reduction.

Of course, it doesn't take much analysis to see that if there are more spending commitments (or if the recession is more severe than assumed), things don't go so well.

In any case, the new LAO publication is at:

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