The nonpartisan Legislative Analyst’s Office (LAO) issued a report finding California’s projected budget surplus at $38 billion, or half the $76 billion that Governor Gavin Newsom estimated in his May budget revision.
The LAO estimated that the state has $38 billion in discretionary state funds to allocate in the 2021‑22 budget process. The LAO attributes the differences between its figure and the governor’s figure to “differing definitions.” The LAO stated that the “Governor’s estimate includes constitutionally required spending on schools and community colleges, reserves, and debt payments. We do not consider these spending amounts part of the surplus because they must be allocated to specified purposes.”
The LAO also recommended that the legislature “restore budget resilience” and criticized the use of “$12 billion in reserve withdrawals and borrowing to increase spending.” The LAO said the state “will need these tools to respond to future challenges, when federal assistance might not be as significant. We urge the Legislature not to take a step back from its track record of prudent budget management.”
The LAO also noted the 400 proposals in Newsom's revised budget and recommended allocating the surplus “in a more targeted manner that reflect its top priorities” and delaying some funding decisions.