November 18, 2009

LAO Forecast Shows Mixed Data for Proposition 98 Funding

While the Legislative Analyst’s Office (LAO) projects a $1 billion Proposition 98 increase for the current year 2009-10, they also project slow state General Fund revenue growth for the next two years. State General Fund base revenues are projected to increase because of a slow economic recovery. The base revenue growth (ongoing revenues); however, will not be sufficient to replace the loss of the one-time General Fund tax revenues that were part of the February budget and failed to be extended in the May special election when Proposition 1A failed passage.

The LAO's net effect is no significant Proposition 98 growth for 2010-11 and a potential decline in 2011-12.   I believe the LAO is too pessimistic, but that does not mean my projections are for strong growth and significant Proposition 98 increases. I believe that the total guarantee will have a slight increase in 2010-11, but that increase will not be sufficient to backfill the lost one-time federal stimulus funds.  

Click here to view the LAO’s Forecast.

~Dave Walrath