Days after Gov. Gavin Newsom released his budget proposal, the nonpartisan California Legislative Analyst’s Office released its own report that addressed Newsom’s rosier-than-anticipated budget outlook for the coming year.The Legislative Analyst’s Office assessment of the governor’s budget deems it’s “alarming” because of the administration’s multiyear budget deficits.
The assessment, released late Monday, also adds that while Newsom’s budget acknowledged the budget challenges facing California, the governor didn’t advance a solution for closing the $18 billion budget gap the LAO projected in its initial budget outlook in November.
The LAO also said the Democratic governor’s budget presumes higher revenues and that the potential volatility of the stock market could pose a serious risk to the state’s revenues.
“After four years of projected deficits, and a cumulative total of $125 billion in budget problems that have been solved so far, we see the state’s negative fiscal situation as chronic and as really needing legislative action,” said Ann Hollingshead, state budget and federal funding analyst for the LAO.
The Legislative Analyst’s Office issued recommendations for the Legislature in its most recent report. The recommendations include acknowledging the risks to the state’s budget by adopting the LAO’s revenue outlook and addressing the state’s multi-year budget deficits by adopting at least $10 billion in continuing solutions, Hollingshead told The Center Square on Tuesday.
“It’s important to address the state’s fiscal challenges now,” Hollingshead said. “We see those challenges could be significantly exacerbated if the administration and Legislature aren’t able to enact ongoing solutions in this budget window versus in future years.”
The Center Square previously reported that the November budget outlook issued by the Legislative Analyst’s Office put California’s budget deficit at $18 billion, much different than the governor’s projected $2.9 billion budget deficit. Despite the big difference in the two projections, budget experts outside the Legislature believe, ultimately, that the two budgetary outlooks aren’t that different.
“What the two sides are digging in about is how likely they think an economic downturn of some kind is in the coming months,” said Chris Hoene, executive director of the California Budget & Policy Center, a Sacramento nonprofit research organization.
“Forecasting revenues is more an art than a science, no matter how quality or professional the people involved are,” Hoene told The Center Square on Tuesday. “You’re talking about a process that involves projecting what the revenue collections are going to look like for the fourth-largest economy in the world.”
Legislators who chair budget-related committees were unavailable to respond to The Center Square’s questions on Tuesday.
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