In general terms, the LAO sees a gloomy outlook. It acknowledges the better-than-forecast revenue numbers but attributes them to a potential AI bubble. Were that bubble to burst, the added revenues would disappear along with others.
Revenues from sales tax and corporate tax suggest a weakness in the economy.
The LAO makes a projection of a workload budget, i.e., what would happen if there are no policy changes. Of course, there will be changes (and the underlying economy may also deviate from what is projected).
We show the LAO numbers below including the estimates for this year and last year and the workload projections for next year:
What you see is a deficit last year, an estimated deficit for this year, and a larger deficit next year absent policy adjustments. Thus, it looks like continued state budget pressures on UC.
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*https://lao.ca.gov/reports/2025/5091/2026-27_Fiscal_Outlook_111925.pdf. Note: To calculate the BSA Surplus/Deficit for 2024-25, the BSA balance estimate that was needed for the end of 2023-24 was taken from historical data at:
https://ebudget.ca.gov/2025-26/pdf/Enacted/BudgetSummary/BS_SCH1.pdf.
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