State cash disbursements above projections
Shows higher revenues largely are spoken for and probably won't lead to big surpluses
California General Fund revenues have performed very strongly since May, with 2023-24 receipts at the state’s tax agencies exceeding June 2024 budget projections by $3.2 billion and 2024-25 income tax agency receipts exceeding the budget projections by $5.3 billion through the end of October.
As noted previously, however, the overwhelming portion of these revenue gains (if not all of the gains to date) are already spoken for to address other budget obligations—for example:
school funding obligations (including maintenance factor accumulated due to the suspension of the Proposition 98 guarantee in 2023-24)
costs from new ballot measures approved by voters
costs due to savings efforts in the 2024 budget that fail to materialize
future unfunded costs shown as operating deficits and draws on the rainy day fund in the 2024 budget multiyear budget projection from the Department of Finance.
The monthly State Controller’s Office (SCO) monthly state cash flow reports for October and prior months add another layer of fiscal concern. Specifically, the August, September, and October reports show several billion dollars of higher-than-projected state expenses, especially for the Medi-Cal Program and certain social services programs. Through October, Medi-Cal disbursements in 2024-25 are $3.7 billion (28%) above administration cash flow projections, and SSI/SSP/IHSS social services disbursements are $1.3 billion (26%) above projections. While differences from cash disbursement projections often occur, the scale and consistency of these cost trends early in the fiscal year suggest some of these costs will add to the state’s budget pressures in 2025.
The Legislative Analyst’s Office is expected to release its 2025-26 Fiscal Outlook in the coming few days, and the Governor will make his 2025-26 budget proposal either to address a projected deficit or dispose of a projected surplus on or before January 10, 2025.
While significant budget surpluses may not be on the horizon, the SCO reports show continued overwhelming strength in the state’s cash position. At the end of October, reserves, special funds, and other accounts held about $92 billion of available and “borrowable” money, able to address General Fund needs. No state has ever experienced the consistent trend of strong state cash balances that California has had the last few years.
Revised on November 13 to reflect small net upward adjustment in October income tax receipts.