Legislative Analyst’s Office Predicts Uncertainty Yet Preparedness in Future Budget Outlook

On November 16, 2016, the Legislative Analyst’s Office (LAO) released a comprehensive report on the assessment of the condition of the California economy and budget over the 2016-17 through 2020-2021 period. While the report predicts unpredictable economic conditions ahead, the report also provides a positive budget outlook and describes how the state is prepared to withstand a mild recession in the future.

Assuming that the state makes no additional budget commitments, the report estimates the state would end up with a decent amount of reserves. Of the $11.5 billion in estimated reserves, $2.8 billion would be set aside for discretionary reserves, which the Legislature can appropriate for any purpose.

In the event of a mild economic downturn scenario, the LAO estimates the state would have enough reserves to cover almost all of its operating deficits through 2020-21 without cutting spending or raising taxes.

These estimates are under the assumptions that the state does not make any changes in current policies or programs during the outlook period, and assumes no new changes in federal policy. The future is uncertain and any unforeseen future changes could have significant impact on the budget outlook.

>>Click here to read the full report from the Legislative Analyst’s Office on the Budget Outlook.