Normally, the only general economic indicator we follow on this blog is California new claims for unemployment insurance - which, as blog readers will know - hasn't signaled a change in the state's labor market toward recession. We have also noted that the UCLA Anderson Forecast is of two minds on the economic outlook, producing one scenario based on a recession occurring and another "soft-landing" scenario in which we tame inflation without a recession.
When we reviewed the state budget yesterday, we noted that for UC proposed funding from the General Fund actually would feature a nominal cut next fiscal year compared with this year when you add "ongoing" and "one-time" monies together. Even going along with the supposedly sharp distinction between the two kinds of funding, on an inflation-adjusted basis, the budget allocation for just the ongoing funding is at best a stand-still.
As the chart above shows, the Consumer Price Index - whether measured by the all-items measure or excluding volatile energy and food prices - shows inflation at the end of 2022 about where it was at the beginning.* Even taking account of the fact that inflation in the sub-indexes for California cities is running a bit below the national average, we still have the state's inflation rate at around 5% per annum. The multi-year budget "compact" with the governor was developed when people were thinking of inflation at 2 to 3%.
Of course, other claimants on the state budget are also making these calculations. Thus, as we move from the January proposal into legislative hearings, the May Revise proposal, and the eventual budget enactment in June, UC will need to be actively engaged in making its claims.
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*The chart - and the latest CPI news release - can be found at:
https://www.bls.gov/news.release/pdf/cpi.pdf.
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https://ia904704.us.archive.org/3/items/new-year-outlook/cpi.mp3
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