Legislative Analyst’s Office Fiscal Projections Coming This Week—Expect Challenging Times to Continue, But Opportunity for Budget Improvements

SACRAMENTO – With the Legislative Analyst’s Office scheduled to release its annual forecast this week, Senate President pro Tempore Toni G. Atkins (D-San Diego), along with Senate Democratic Caucus colleagues, have begun planning for the year ahead.

The LAO’s Fiscal Outlook provides the first updated multi-year forecast since the 2020-21 state budget agreement was reached this summer. While much of California continues to endure economic challenges due to the pandemic and inability of the federal government to pass a new stimulus package, based on revenue performance to date, the expectation is that the state’s revenues forecast will be better than prior forecasts when the state was still in the early stages of the COVID-19 crisis.

“While we expect good news in terms of our state’s fiscal health later this week, challenging times are not behind us, and Senate Democrats will maintain our approach of fiscal responsibility,” Atkins said. “Our top goal remains clear—avoid having the state become part of the economic problem, which means avoiding cuts to programs and middle class tax increases that do more harm to the economy than they provide in terms of budget-balancing benefits. I expect that the LAO report will contain some welcome news but also stark warnings of the widespread economic challenges that remain. The hard work continues.”

To the extent an improved budget conditions permits, priorities for next year’s budget will include:

• Restore trigger solutions that were originally expected to be reversed with federal funds, including Proposition 98 deferrals, cuts to higher education, and state employee compensation.
• Eliminate the scheduled program suspensions set to effect the 2021-22 fiscal year, which are primarily focused on health care, aging, and development disability programs.
• Assist local governments whose revenues are suffering due to the economic impacts of the pandemic, including those reliant on tourism and hotel occupancy taxes.
• Repay recent borrowing and return reserve funds.
• Make targeted, new investments to meet current challenges, including the COVID-19 health crisis, Californians experiencing homelessness, and emergency preparedness.

The improved fiscal outlook is encouraging, but it doesn’t supplant the need for federal support, Atkins said.

“The need for federal stimulus is still critical for a strong economic rebound, and to help California continue to meet some of our state’s most pressing needs, which includes enhancing unemployment benefits, providing relief for renters and mom-and-pop landlords, and supporting local governments and our schools,” Atkins said.

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Toni G. Atkins is President pro Tempore of the California Senate. Having previously served as Speaker of the California Assembly, she began her tenure in the Senate in 2016. As Senator for District 39, she represents the cities of San Diego, Coronado, Del Mar and Solana Beach. Website of President pro Tempore Toni G. Atkins: www.senate.ca.gov/Atkins