In its annual Fiscal Outlook released today, the Legislative Analyst’s Office (LAO) suggests that the state’s upcoming 2021-22 State Budget could experience a $26 billion “windfall,” confirming recent reports that show state revenues eclipsing budget estimates. The LAO stresses that this windfall is entirely one-time in nature, resulting in revisions from prior and current year budget estimates of revenues and expenditures and a state economy that has performed unexpectedly well for higher-income earners.

While the Administration is currently in the process of putting together the Governor’s proposed 2021-22 State Budget, the Legislature will also be focusing on its budget priorities, given this unanticipated revenue surplus.  RCRC and other ‘fiscal watchers’ expect to see the Newsom Administration propose continued investment in pandemic response, as well as an acknowledgement of the need to bolster programs funded through 1991 and 2011 Realignment and other safety net programs.  The Governor has also been clear about his interest in investing in economic recovery for the state’s small businesses and continuing efforts to improve the state’s wildfire response.  Senate Democrats will seek to restore trigger solutions from the 2020-21 State Budget that was enacted over this past Summer, including deferrals to K-14 schools, and eliminating scheduled program suspensions included in the 2020-21 State Budget.