Transcript California’s Fiscal Outlook Legislative Analyst’s Office www.lao.ca.gov LAO Tax Revenues Rising Again Major General Fund Tax Revenues In Billions $90 99-00 00-01 01-02 02-03 03-04 04-05 05-06 Budget Forecast LAO.

California’s Fiscal
Outlook
Legislative Analyst’s Office
www.lao.ca.gov
LAO
Tax Revenues Rising Again
Major General Fund Tax Revenues
In Billions
$90
80
70
60
50
99-00
00-01
01-02
02-03
03-04
04-05
05-06
Budget
Forecast
LAO
…But Structural Shortfall Remains
Annual Revenues and Expenditures
$120
Revenues
Expenditures
Alternative Expendituresa
110
100
90
80
70
Operating
Deficits
Operating
Surplus
60
99-00
01-02
03-04
05-06
07-08
Forecas t
09-10
LAO
One Key Reason—Lots Of Budget
Borrowing
Repayment Of General Fund Budget-Related Debt
(In Billions)
$4.5
4.0
3.5
Special Funds
Local Government/
K-12 Education
Budget-Related Bonds
3.0
2.5
2.0
1.5
1.0
0.5
2004-05
2005-06
2006-07
2007-08
2008-09
LAO
Recent Productivity Growth
At All-Time High
Annual Average Increase in
U.S. Nonfarm Business Productivity
4.0%
3.0
Long-Term Average 2.3%
2.0
1.0
1950-54
1960-64
1970-74
1980-84
1990-94
2000-04
LAO
California Jobs:
Pre-2004 Benchmark
Year-to-Year Percent Change, by Month
4%
Household Survey
3
Payroll Survey
2
1
0
-1
-2
-3
2001
2002
2003
2004
LAO
California Jobs:
Post-2004 Benchmark
Year-to-Year Percent Change, by Month
4%
3
Household Survey
Payroll Survey
2
1
0
-1
-2
-3
2001
2002
2003
2004
Jan2005
LAO
California Home Construction
To Remain Strong
Permits for New home Construction
In Thousands
250
Multiple Units
200
Single Units
150
100
50
1997
1999
2001
2003
2005
2007
Forecast
LAO
PIT Liabilities on Rebound
In Billions
PIT Liabilities From:
$60
Capital Gains and Stock Options
Other Sources
50
40
30
20
10
1999
2000
2001
2002
2003
2004
2005
2006
Forecast
2007
LAO
California Profits Have Been
Booming
Annual Percent Change in California
Taxable Corporate Profits
25%
20
15
10
5
0
-5
-10
-15
1999
2000
2001
2002
2003
2004
2005
2006
Forecast
2007
LAO
Proposed Solutions in
2005-06 Governor’s Budget
Fund Shifts
Revenues
Program Savings
Loans
LAO
The Legislature’s
Budget Opportunity
The Building Blocks:
 Healthy Revenues
 $2.2 billion more than Governor
 Ongoing 2005-06 Solution
 $4 billion to $5 billion—
similar in magnitude to budget
LAO
The Payoff of Acting Now:
 2005-06 Balanced, With Solid Reserve
 2006-07 Close, Using Remaining Bonds
 Out-Year Problem Persists, But Smaller
LAO
The Price of Inaction:
 2005-06 Precariously Balanced
 Major Shortfalls in 2006-07 and Beyond
 Close to $10 billion
LAO
General Fund Operating Shortfalls,
Under Alternative Scenarios
(In Billions)
$0
-2
-4
-6
-8
Governor's Budget
-10
Without Ongoing Solution
-12
2004-05
2005-06
2006-07
2007-08
2008-09
LAO