LAO: $68 billion deficit to address in 2024

Includes $17 billion due to prior year (2022-23) Prop. 98 issues plus $51 billion in other issues related to lower revenues

The Legislative Analyst’s Office (LAO) annual Fiscal Outlook, released here, estimates that the Legislature and the Governor will have to agree on $68 billion of budget-balancing actions in order to pass the June 2024 state budget.

Last week, LAO announced that it was lowering its revenue estimates by $58 billion over the 2024 “budget window” (fiscal years 2022-23 through 2024-25). The Fiscal Outlook takes that new revenue estimate, plus estimates of lowered 2021-22 revenues (“entering fund balance”), and makes an initial estimate of the amount of corrective actions needed to balance the June 2024 budget.

While LAO estimates typically calculate the budget problem by bringing Proposition 98 school funding close to its constitutional minimum, this LAO report notes that the unusual delayed nature of 2022 revenues results in $17 billion of potential school funding deficit impacts that the Legislature could consider, in addition to $51 billion of other, more typical deficits connected mainly to the lower revenues. The LAO report also identifies that state spending is several billion dollars below prior estimates, offsetting a bit the negative effects of the lower projected revenues.

The Governor will release the administration’s independent estimates and budget proposals on or before January 10.