LAO Publishes 2019-20 Fiscal Outlook Report

The California Legislative Analyst’s Office (LAO) on Wednesday published its report, “The 2019-20 Budget: California’s Fiscal Outlook,” which assesses the status of the state’s budget in anticipation of upcoming state budget process. The report finds that the state budget “is in remarkably good shape” and, using its revenues and spending estimates, determines the state’s constitutional reserve would reach $14.5 billion by the end of 2019-20. The LAO projects the Legislature will have nearly $15 billion in resources available to allocate in the 2019-20 budget process which can be used to build additional reserves or make new one-time and/or ongoing budget commitments.

The longer-term fiscal outlook for the state also remains positive. The LAO estimates that under an economic growth scenario, the state would have operating surpluses around $4.5 billion per year (though declining over time). Under a recession scenario, the state would have enough reserves to cover a budget problem if the Legislature used all its available resources in 2019-20 to build additional reserves.

The report includes a fiscal outlook specific to health and human services, among other areas. The LAO examines short-term and long-term impacts to Medi-Cal and In-Home Supportive Services (IHSS), assessing enrollment, program costs, and budgetary implications. In 2019-20, the LAO projects that state general fund spending will increase by 6.1 percent ($1.4 billion) for Medi-Cal. The LAO anticipates that Medi-Cal caseload will slightly decline due to the strong economic performance; however, the decline in caseload will be more than offset by the projected increase in Medi-Cal costs per enrollee due to increased utilization of services and increased prices paid by Medi-Cal. Gradual declines in the federal share for optional Medi-Cal expansion and the Children’s Health Insurance Program (CHIP) will cause increases in state general fund expenses.

The full LAO fiscal outlook report for 2019-20 is available here.