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LAO Californias Economic and Budget Outlook Legislative Analysts Office .
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LA O California’s Economic and Budget Outlook Legislative Analyst’s Office www.lao.ca.gov
Transcript of LAO Californias Economic and Budget Outlook Legislative Analysts Office .
LAO
California’s Economic and Budget Outlook
Legislative Analyst’s Office
www.lao.ca.gov
LAO
California Employment ExpandingYear-Over-Year Percent Change in California Employment, By Quarter
-3
-2
-1
0
1
2
3
4%
Household Survey
Payroll Survey
2001 2002 2003 2004 2005
LAO
Leading Sector—ConstructionPercent Change in Jobs by Industry Sector,December 2004 Through December 2005
2.0 4.0 6.0 8.0 10.0%
Manufacturing
Trade, Transportation, and Utilities
Financial Activities
Natural Resources and Mining
Government
Information
Total
Services
Construction
LAO
Outlook—Continued Growth
Housing to Downshift Consumer Spending To Hold Its Own Business Hiring and Spending To
Continue
LAO
Risks To Economic Outlook
Energy Costs• More price increases may spark inflation
California Real Estate• Market is cooling off• “Orderly” decline projected in sector that is
prone to booms and busts
LAO
General Fund Revenue StrengtheningTotal General Fund Revenues(In Billions)
99-00 01-02 03-04 05-0600-01 02-03 04-05 06-07
60
65
70
75
80
85
90
$95
2005 Budget Act
LAO November 20052006-07 Budget
LAO
Income Tax Estimated Payments SoaringAnnual Percent Change
-30
-20
-10
0
10
20
30
40%
98 99 00 01 02 03 04 05
Personal Income Tax
Corporation Tax
LAO
Budget Plan
Fails to Get State’s Fiscal House in Order
Despite Booming Revenues,Leaves State With:
• Large structural shortfalls
• Enormous outstanding obligations
LAO
Operating Shortfalls Persist Despite Booming RevenuesGeneral Fund(In Billions)
-6
-5
-4
-3
-2
-1
0
$1
2004-05 2005-06 2006-07 2007-08 2008-09
LAO
Budgetary BorrowingOutstanding After 2006-07
Private Markets
Special Funds
Schools
Local Governments
Total: $20 Billion
LAO
Amnesty-Related Income Tax EffectsBudgetary Basis(In Billions)
-2
-1
0
1
2
3
4
$5
03-04and Prior
04-05 05-06 06-07 07-08 08-09 09-10 10-11
2005-06 Budget Act
LAO Feburary 2006
LAO
Risks and Pressures
EconomyHigher Energy Costs/Steeper Real Estate Decline
LawsuitsPotential Exposure of Nearly $1.5 Billion
Federal Deficit Reduction ActHundreds of Millions of Dollars Annually
Unfunded LiabilitiesMultibillion DollarExposure Over Time
LAO
LAO Advice
Slow Spending Increases Use Resources to Increase Reserves or
Prepay Debt
