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Legislative Analyst's Fiscal Outlook
To: CLA Members/ Systems/ Network Contacts
From: Mike Dillon, CLA Lobbyist; Christina Dillon, CLA Lobbyist
RE: LEGISLATIVE ANALYST'S FISCAL OUTLOOK FOR NEXT FIVE YEARS
On Wednesday, the Legislative Analyst's Office issued a report containing projections of General Fund revenues and expenditures for 2006-07 through 2011-12. The LAO, in recent years, has developed this Fall report to assist the Legislature with its fiscal planning, by assessing the revenues and expenditures of the State. The report concludes that since there is a "modest" increase in revenues than estimated when the 2006-07 Budget was passed last June, the State will still face an operating shortfall in the range of $4.5 billion to $5 billion during the subsequent two fiscal years. In those subsequent years, the operating shortfall begins to decline, primarily as a result of repayments associated with the so-called "deficit-financing bonds," which were approved by the voters in March 2004.
In a cautionary statement, the Analyst notes, "It may be tempting for the State to rely heavily on the large carryover reserve balance and other one-time solutions to get through 2007-08. However, failing to meaningfully address the long-term fiscal imbalance would leave the state in a precarious position." To address the shortfall, the LAO suggests that certain savings could be achieved through the reduction or suspension of cost-of-living adjustments in a variety of areas, including health, social services, and trial courts, as well as suspension or elimination of certain tax credits, such as the Teacher's Tax Credit. Legislative leaders have expressed caution against funding new programs in light of the slight increase in revenues, and H.D. Palmer, a spokesman for the Governor's Department of Finance, was quoted in The Sacramento Bee as saying that the DOF "had already begun turning down requests from state agencies to boost their budgets next year." In the meantime, the Governor and his staff continue to develop the 2007-08 Budget which will likely be released the week of January 8th.
Posted on November 17, 2006 3:47 PM | Permalink