Week of November 24, 2014 
by Shaun Rundle, Government Affairs Specialist 
On Wednesday November 19th the nonpartisan Legislative Analyst’s Office (LAO) released its 2015-2016 fiscal outlook report. Providing a positive forecast on California’s looming effort to reduce deficits, Legislative Analyst Mac Taylor expects the next fiscal year to end with roughly $4.2 billion in reserves. Proposition 2, passed by California voters on November 4th, provides nearly half that amount, which is $2 billion more than projected. Unforeseen future economic slows and possible stock market drops could lessen reserves, however, and Prop 2 implementation decisions made by the upcoming 2015-2016 legislature could also alter the reserve amount. In response, LAO notes that the over $4 billion reserve would be enough to keep the state afloat for a year or two before serious budget problems would occur. The office asks the incoming legislature to affectively build reserves to further combat unexpected economic conditions.

In assessing the outlook, LAO took into account the temporary taxes revenues created by Proposition 30 passed by voters in 2012. Those $6 billion annual revenues will expire in 2016 and 2018, and will have little to no effect on the fiscal outlook. Also considered in revenue offsets was spending related to Proposition 98, the state’s constitutional minimum school and community college funding requirement. Such spending comes from the state’s General Fund, and increased revenues in that bucket often equal increased spending under Prop 98.  The LAO report estimates total General Fund revenues will increase from $107 billion currently to $111 billion in 2015-2016.

What does the outlook mean for law enforcement and corrections? General Fund spending for the California Department of Corrections and Rehabilitation (CDCR) is currently estimated to be at $9.1 billion, which is an increase of $136 million from 2013-2014 spending. The increase in costs is related to increased workers compensation and contract bed expenses, as well as expansions of correctional officer training academy. LAO expects CDCR spending in 2015-2016 to stay at $9.1 billion. A lack of increased costs is estimated to result from reduced prison and parole population attributed to 2011’s AB 109 and realignment implementation. Accordingly, the LAO expects increased savings in 2015-2016 as a result of Prop 47’s reduction in prison populations. 

CPOA will continue to monitor fiscal and public safety impacts as the incoming legislature makes decisions affecting the LAO’s projected budget reserves. 

Read the full LAO report here

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