State Budget Update

Legislative Analyst’s Office

C.A.S.H. Fall ConferenceOctober 15, 2013

www.lao.ca.gov

2

Update on U.S. Economy

Gross Domestic Product Projected to Grow About 3 Percent AnnuallyYear-to-Year Percent Change

3

Personal Income Projected to Grow About 5 Percent AnnuallyYear-to-Year Percent Change

4

S&P 500 Volatile But Projected to Grow Over Period Year-to-Year Percent Change

5

Employment Projected to GrowLess Than 2 Percent AnnuallyYear-to-Year Percent Change

6

7

Major Concerns

Federal Shutdown Debt Ceiling Impasse Downturn in Stock Market

8

Update on California Economy

Payroll Employment GrowingIn Eight Industry SectorsPercent Change From August 2012 to August 2013

9

Unemployment Rate for 12 Largest Counties Varies NotablyRate in August 2013

10

Significant Increase in Housing Prices in State’s Large Metropolitan AreasPercent Change

11

State Revenue Growth Linked With Stock Market GrowthYear-Over-Year Percent Change

12

13

Revenue Update

14

Budget Act Revenue AssumptionsGeneral Fund and Education Protection Account Combined(Dollars in Millions)

15

General Fund ConditionUnder Budget ActGeneral Fund and Education Protection Account Combined(Dollars in Millions)

16

2012-13 State Revenue UpdateYear End (In Millions)

17

2013-14 State Revenue Update

Personal Income Tax (PIT) Withholding Above Projections

PIT Estimated Payments Above Projections Sales Tax Revenues Below Projections Corporate Tax Revenues Below Projections

18

Education Budget Recap

19

Proposition 98 FundingIn Millions

20

Major 2012-13 ChangesIn Millions

21

Major 2013-14 ChangesIn Millions

Programmatic Per-Pupil Funding ReboundingPer-Pupil Funding in Dollars

22

23

Tracking Deferral PaydownsIn Millions

24

Education Budget Outlook

25

Pessimistic Scenario

26

Best Guess Scenario

27

Optimistic Scenario

Visit the LAO website at:www.lao.ca.gov

28