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ITUP Summary of the Legislative Analyst’s November 2014 Fiscal Outlook for the 2015-16 Budget

You can find the full version of the LAO’s Fiscal Outlook here: The 2015-16 Budget: California’s Fiscal Outlook

 

The Legislative Analyst’s Office mid year projection is that California will finish the 2014-15 fiscal year with a $2 billion surplus and that the entire surplus will be allocated to K-12 education due to Prop 98.

The LAO projects that California will end the next (2015-16) fiscal year with a $4.2 billion surplus and that the entire surplus will be allocated to building up the Rainy Day Reserve fund and to paying off debt due to the new budget rules passed under Proposition 2. This assumes a healthy contribution to K-12 under Prop 98 and no other new spending initiatives from the Governor or state legislature.

Finally the LAO projects that in the projected surpluses in future years, Prop 98 will grow education spending; Prop 2 will pay off debts and build the Rainy Day Reserves. While the Analysis predicts moderate sustained economic growth, if the economic growth stalls or the stock market tanks, the state’s budget surpluses will disappear.

The Analysis projects that GDP will grow between 2.5 and 3% for the next six years, that personal incomes will grow about 5% and unemployment will drop from 7.5% to 5% while inflation will average about 2%.

State General Fund revenues are projected to grow about 3.5 to 4.0% for the next 6 years. State General Fund spending is expected to grow about 2.5%. State spending on K-12 is projected to grow 1.4% over the next 6 years and CSU and UC at 4.4% and 4.0% respectively. Medi-Cal General Fund Spending will grow about 4.0% annually, most of that growth occurs after 2016-17.

It projects that Medi-Cal enrollment will slow and then decline for families and individuals as the economy continues to improve and the one time increase due to the ACA is absorbed. It reports that 2 million enrolled under the “optional” expansion (i.e. for the most part the medically indigent adults) and 1 million enrolled under the “mandatory” expansion (i.e. existing program eligible but not heretofore enrolled due to administrative and informational obstacles.

The Analysis predicts that per member per month payments will grow about 3.5%, and slightly less for seniors’ spending. The analysis projects that California will receive an additional $500 million if CHIP is reauthorized as the match rate for expansion children would increase from 65% to 88%. Lastly it concludes that California will need to revise its 3.9% Medi-Cal managed care tax (raises $900 million) to comply with federal rules governing provider and plan taxes.

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