The 2023‑24 Budget California’s Fiscal Outlook

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The key points of the Legislative Analyst's 2023-2024 Budget report are:

Economic Conditions Weigh on Revenues.

  • The longer inflation persists and the higher the Federal Reserve increases interest rates in response, the greater the risk to the economy.
  • The chances that the Federal Reserve can tame inflation without inducing a recession are narrow.
  • Reflecting the threat of a recession, our revenue estimates represent the weakest performance the state has experienced since the Great Recession.

The alarming points of the Legislative Analyst's 2023-2024 Budget report are:

State Faces $25 Billion Budget Problem and Ongoing Deficits.

  • The budget problem is mainly attributable to lower revenue estimates, which are lower than budget act projections from 2021‑22 through 2023‑24 by $41 billion.
  • The $25 billion budget problem in 2023‑24 is roughly equivalent to the amount of general‑purpose reserves that the Legislature could have available to allocate to General Fund programs ($23 billion). 
  • Based on historical experience, should a recession occur soon, revenues could be $30 billion to $50 billion below our revenue outlook in the budget window.

The points of the Legislative Analyst's 2023-2024 Budget report detail an explanation of  inflation. Without addressing how  Federal infusion of money actually created a false economic growth.  While it is suggested this "booming economy led to inflation" under most normal circumstances a booming economy will level off and not lead to a roller coaster of inflation - recession - and more gov't debt.  FACT: Inflation is an increase in the money supply 

Booming Economy Has Led to High Inflation. 

  • Spurred by pandemic‑related federal stimulus, the U.S. economy entered a period of rapid expansion in the summer of 2020 that extended through 2021. 
  • Over the last year, however, evidence has mounted that this rapid economic expansion was unsustainable. 
  • Amid record low unemployment and continued global supply chain challenges, businesses have strained to meet surging consumer demand. 
  • As a result, consumer prices have risen 8 percent over the last year, more than three times the norm of the last three decades.

The contradictory points of the Legislative Analyst's 2023-2024 Budget report are these which undermine prior discussion of a "booming economy":

The impacts of recent interest rate hikes are apparent in certain areas of the economy: 

  • home sales have dropped by one‑third
  • car sales are at the lowest level in over a decade
  • stock prices are down 20 percent from recent highs. 

Some impacts also can be seen in state tax collections. For example, estimated income tax payments for 2022 so far have been notably weaker than 2021, likely due in part to falling stock prices.

The entire report can be read here:  The 2023-24 Budget: California's Fiscal Outlook

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