The 2017-18 Budget: Alternatives to the Governor’s Proposition 2 Proposals

The 2017-18 Budget: Alternatives to the Governor’s Proposition 2 Proposals MAC TAYLOR • L E G I S L A T I V E A N A L Y S T • FEBRUARY 2017 Summary Proposition 2 (2014) requires the state to make: (1) minimum annual payments toward certain eligible debts and (2) deposits into the state’s rainy day fund. As part of this year’s budget proposal, the Governor has outlined his priorities for required debt payments, allocating the majority to repay special fund loans and Proposition 98 settle up. The Governor also proposes the state end 2017-18 with $9.4 billion in total budget reserves, including $7.9 billion in the state’s rainy day fund. This publication outlines alternatives to the Governor’s proposals that could free up General Fund resources. Of these options, there is the strongest argument for counting the repayment of weight fee loans toward Proposition 2 debt payment requirements. (These are loans to the General Fund from a fund receiving transportation weight fee revenues that—upon repayment—are used for transportation bond debt service.) This option would free up $380 million in General Fund resources in 2017-18. The Legislature could implement this option, or others, either by: (1) reducing other currently proposed repayments or (2) funding possible additional debt payments if requirements are higher in May. The Legislature could use these additional funds to build more reserves, address the Governor’s estimated budget problem, or adopt other legislative priorities. 2017-18 BUDGET INTRODUCTION Governor Proposes Total Reserves of Constitution to require the state to make minimum $9.4 Billion. The 2017-18 Governor’s Budget annual debt payments and budget reserve deposits. proposes that the state end 2017-18 with $9.4 billion As part of this year’s budget proposal, the Governor in total reserves. As shown in Figure 1, this would has outlined his priorities for these required debt increase total reserves from their assumed level payments and his proposed level of total reserves, of $8.5 billion in the 2016-17 budget package. including those required under Proposition 2. This This total reserve balance would consist of: publication outlines alternatives for Proposition 2 (1) $1.6 billion in the state’s discretionary reserve, debt payments and reserve balances that could free and (2) $7.9 billion in the state’s mandatory reserve, up General Fund resources. The Legislature could which is governed by the terms of Proposition 2 use these additional funds to build more reserves, (2014). address the Governor’s estimated budget problem, Under Governor’s Revenue Estimates, State or adopt other legislative priorities. Faces Budget Problem of $1.6 Billion. In preparing Figure 1 the 2017-18 budget, the administration concluded Governor Proposes that the state’s fiscal condition had worsened and, Total Reserves of $9.4 Billion absent new budget actions, the state would have a (In Billions) budget deficit of $1.6 billion at the end of 2017-18. The administration proposes $3.2 billion in budget Reserves Assumed in 2016-17 Budget $8.5 BSA deposit for 2017-18 1.2 actions to eliminate its projected $1.6 billion 2017-18 proposed decrease in SFEUa -0.2 deficit and leave a balance in the 2017-18 year-end Total Reserve Balances $9.4 discretionary reserve of $1.6 billion. a Difference between assumed SFEU balance in the 2016-17 budget package ($1.8 billion) and proposed SFEU balance in the 2017-18 Proposition 2 Requires Minimum Debt Governor’s Budget ($1.6 billion). Payments and Reserve Deposits Each Year. Passed BSA = Budget Stabilization Account and SFEU = Special Fund for Economic Uncertainties. by voters in 2014, Proposition 2 amended the State DEBT PAYMENTS Proposition 2 Debt Payment Requirements constitutionally required debt payments for any reason. We note that—as described in the nearby State Constitution Requires Minimum Debt box—the annual state budget pays down billions of Payments Each Year. Proposition 2 requires the dollars of other liabilities outside of Proposition 2 state to spend a minimum amount each year to pay requirements. down specified debts. These minimum payments Minimum Debt Payment Requirements Set are required through 2029-30. Thereafter, debt by Proposition 2 Estimates. Figure 2 illustrates the payments become optional, but amounts not steps in determining the amount of required debt spent on debt must be deposited into the rainy payments under Proposition 2. First, the state must day reserve. Unlike reserve requirements, which set aside 1.5 percent of General Fund revenues (we the Governor and Legislature may reduce during refer to this as the “base amount”). Second, the a budget emergency, the state may not reduce the 2 Legislative Analyst’s Office www.lao.ca.gov 2017-18 BUDGET state must set aside a Figure 2 portion of capital gains Provisions of Proposition 2 (2014) revenues that exceed Relevant to 2017-18 Budget Process a specified threshold Upcoming Fiscal Year (2017-18) (we refer to this as “excess capital gains”). “Base Amount” “Excess Capital Gains” Portion of capital gains revenues over 1.5 percent of The state combines 8 percent of General Fund taxes. General Fund revenues. • Less amounts that must be spent on these two amounts and Proposition 98. then allocates half of the total to pay down 50% 50% eligible debts and the Debt Payments Budget Stabilization Account other half to increase Eligible debts include: • Fill rainy day reserve to 10 percent the level of the rainy • Proposition 98 “settle up.” of General Fund taxes. • Special fund loans. • Can only be withdrawn during a day reserve. • Payments for pensions “budget emergency.” a above current law requirements. Debt Payment • Prefunding retiree health benefits. Requirements Will a A budget emergency is defined as: (1) a disaster-related emergency or (2) a fiscal emergency, which requires Change in May. While a determination by the Governor that estimated resources are insufficient to fund total General Fund spending in the current or upcoming fiscal year at the level of the three most recent budget acts, adjusted for inflation the base amount is and population. relatively steady, the excess capital gains gains in 2017-18 seem inconsistent with their own portion of the Proposition 2 requirements can economic forecasts. As a result, when the state has change significantly. In particular, these changes more information about revenue collections at the can occur with changes in estimated revenues, time of the May Revision, it is possible that the state particularly those associated with capital gains. could have more revenue than the administration In our January 2017 Overview of the Governor’s now projects. If higher revenue estimates include Budget, we noted that the administration’s estimate increased revenues from capital gains, the state of 2017-18 revenues associated with the personal would most likely have higher debt payment income tax seemed too low. In particular, the requirements under Proposition 2. administration’s estimates of revenues from capital Proposition 2 One Part of State’s Debt Approach Other Liabilities Paid Outside of Proposition 2 (2014) Requirements. Beyond Proposition 2’s requirements, the annual budget pays down several billion dollars of liabilities each year. These include debt service on bonds, budgetary liabilities—such as K-14 mandate reimbursements—and pension unfunded liabilities. For example, in addition to $1.3 billion in Proposition 2 debt payments, the 2016-17 Budget Act allocated about $3 billion in General Fund resources to the California Public Employees’ Retirement System to pay down the unfunded liability for state employee pension benefits. The 2016-17 budget plan also included about $5 billion for debt service on general obligation bonds. www.lao.ca.gov Legislative Analyst’s Office 3 2017-18 BUDGET Debts Eligible for Proposition 2 Funds outstanding as of January 1, 2014 are debts eligible for payment under Proposition 2. Our display As shown in Figure 3, there are three types of of special fund loans differs somewhat from the debts eligible for payments under Proposition 2. administration’s display. In particular, unlike the These include certain budgetary liabilities (amounts administration, we include “weight fee loans” as the state owes schools and amounts the state’s eligible. These are loans to the General Fund from General Fund owes other state funds), unfunded a fund receiving transportation weight fee revenues liabilities for pensions, and prefunding for retiree that—upon repayment—are used for transportation health benefits. Proposition 2 also made eligible bond debt service. The total amount of outstanding reimbursements for pre-2004 mandate claims weight fee loans, before this year’s payment, stands from cities, counties, and special districts, but at $1.4 billion. Including weight fee loans, the state the 2014-15 budget paid off these outstanding currently has $3.5 billion in outstanding special claims. We describe each of the remaining eligible fund loans. liabilities in greater detail below. In particular, we Proposition 98 Settle Up Similar to highlight cases where our estimate of potentially Administration’s Display. Proposition 98 eligible debts differs from the administration. establishes a constitutional minimum funding Special Fund Loans Include Weight Fee Loans. guarantee for schools and community colleges. As one of many actions the state took in the 2000s Settle up occurs when the minimum guarantee to address its budget problems, the state loaned turns out to be larger than the amount that was amounts to the General Fund from other state initially included in the budget. Settle up existing accounts known as special funds. Any such loans as of July 1, 2014 is Figure 3 eligible to be paid from Liabilities Potentially Eligible for Proposition 2. Our Proposition 2 Debt Payment Funds estimate of $1 billion in (In Billions) total outstanding settle Amount up is consistent with the Budgetary Liabilities administration’s estimate. Special fund loans to the General Funda $3.5 Pension Liabilities for Proposition 98 settle up 1.0 School and Community Unfunded Retirement Liabilities—Pensions College Employees School and community college employeesb $89.1 Includes “Classified” State and CSU employees 49.6 UC employees 15.1 Employees. Payments Judges 3.3 toward unfunded CalPERS quarterly payment deferral 0.6 liabilities of “state-level Unfunded Retirement Liabilities—Retiree Health pension plans” are State and CSU employees $76.7 UC employees 21.1 eligible to count under a Amount listed differs from administration’s display for two reasons. First, we include certain transportation Proposition 2 debt loans that the administration lists separately ($706 million). Second, we list transportation loans from weight fees that the administration does not include in its list of eligible debts ($1.4 billion). payment requirements. In b This estimate does not reflect the CalSTRS board’s recent decisions to change the investment return and other assumptions. This estimate includes the total unfunded liabilities for schools and community Figure 3, we have listed college employees administered by CalSTRS ($72.6 billion) and CalPERS ($16.5 billion), the latter of which is not included in the administration’s display of Proposition 2 eligible debts. The CalSTRS total unfunded liabilities of includes amounts assigned to the state, districts, and unassigned. pension benefits related 4 Legislative Analyst’s Office www.lao.ca.gov 2017-18 BUDGET to school and community college employees Payments for Retirement Liabilities and ($89.1 billion), state and California State University Retiree Health Must Be in Excess of Current (CSU) employees ($49.6 billion), University of Base Amounts. Proposition 2 requires payments California (UC) employees ($15.1 billion), and for retirement and retiree health liabilities to be judges ($3.3 billion). Our display of eligible pension “in excess” of “current base amounts.” Under one debts for school and community college employees interpretation, “current base amounts” means those differs from that of the administration. This required under law or agreements at some point in category includes both the unfunded liability for 2014 when the Legislature proposed and voters then the California State Teachers’ Retirement System passed Proposition 2. In other words, the measure (CalSTRS), the pension program for teachers and would aim to accelerate payments for retirement administrators (which the administration includes liabilities above what they would have been under in its display) and the California Public Employees’ law or policies as of 2014, rather than replacing Retirement System (CalPERS) program for school future payments already planned at that time. and community college classified employees, such Governor’s Proposal for Debt Payments as food service workers (which the administration does not include). As a result, our estimate of these Under the Governor’s current revenue eligible unfunded liability costs are $16.5 billion estimates, total debt payment requirements under higher than that of the administration. Proposition 2 would be $1.2 billion in 2017-18. Payments to Prefund Retiree Health Benefits. Figure 4 shows how the administration proposes to Until recently, like most governments in the allocate these requirements. United States, California did not fund health Administration’s Proposal Focuses on and dental benefits for its retirees during their Special Fund Loans and Settle Up Payments. working careers in state government. This has The administration’s proposal focuses on special resulted in large unfunded liabilities for those fund loan repayments and settle up payments. benefits. Proposition 2 permits the state to use In 2017-18, it uses $487 million of the required its debt payment funds to prefund these benefits. $1.2 billion to repay special fund loans. As shown Prefunding involves investing employee and in Figure 5 (see next page), the largest of these employer contributions and using the resulting repayments are $235 million for the Transportation investment returns to partially fund future costs. Congestion Relief Fund, $100 million for the Prefunding these benefits costs taxpayers much Figure 4 less over the long term than the expensive “pay-as- Administration’s Proposition 2 you-go” approach (where later generations pay for Debt Proposal for 2017-18 benefits of past public employees). Figure 3 displays the unfunded liability for retiree health benefits (In Millions) associated with the state and CSU employees Special fund loans to the General Funda $487 ($76.7 billion) and UC employees ($21.1 billion). Proposition 98 settle up 400 State and CSU employees retiree health 100 The administration’s display of eligible retiree University of California pensions 169 health benefits for state and CSU employees is Total $1,156 based on an older actuarial valuation and therefore a Includes $8 million in interest on those loans. Also includes $235 million in repayments to the Transportation Congestion Relief our figures differ slightly. Fund, which the administration displays separately. www.lao.ca.gov Legislative Analyst’s Office 5 2017-18 BUDGET Options for Proposition 2 Figure 5 Debt Payment Requirements Proposed Special Fund Loan Repayments in 2017-18 In this section, we outline two options for using (In Millions) Proposition 2 debt payment requirements that could free up General Fund resources. They are: Fund Name Amount Transportation Congestion Relief Fund $235 • Count Repayment of Weight Fee Loans Greenhouse Gas Reduction Fund 100 Toward Proposition 2. The administration Immediate and Critical Needs Account 90 estimates that the General Fund must Hospital Building Fund 15 False Claims Act Fund 13 repay $380 million in loans associated Contingent Fund of the Medical Board of California 9 with weight fee revenues in 2017-18. Behavioral Science Fund 6 The administration does not count this Firearms Safety and Enforcement Special Fund 5 Registry of Charitable Trust 3 repayment toward Proposition 2 debt Environmental Water Fund 2 payment requirements. As we noted in our California Water Fund 1 March 2015 report, The 2015-16 Budget: Subtotals, Proposed Repayments (Principal) ($479) Interest on loans projected for repayment $8 The Governor’s Proposition 2 Proposal, we Total Proposed Special Fund Repayments $487 think there is a strong case that these loans can be counted. Counting weight fee loans Greenhouse Gas Reduction Fund, and $90 million toward Proposition 2 could thereby free up for the Immediate and Critical Needs Account. The $380 million in General Fund resources. special fund loan repayments include $8 million in 2017-18 interest on those payments. The Governor’s • Count Higher Employer Contributions proposal also includes a $400 million payment that for CalPERS and CalSTRS Toward would reduce the total settle up owed to schools Proposition 2. The CalPERS and CalSTRS and community colleges to $626 million. boards recently changed their investment Administration Also Counts Prefunding return and other assumptions. These of Retiree Health Benefits. The state has begun changes result in annual increases in the implementing its plan to address retiree health state’s contribution rates, and therefore benefit liabilities through (1) employer (state) and pension unfunded liability payments, employee contributions to prefund these benefits beginning in 2017-18. These contributions and (2) a reduction in the benefits earned by future represent an increase above the rates employees. Through the collective bargaining projected at the time Proposition 2 was process, the state has implemented its plan for most proposed and passed. If these changes state employees. The administration’s proposal for represent an increase over “current base Proposition 2 debt payments counts all of the state’s amounts” as defined by Proposition 2, there current costs of prefunding retiree health benefits is an argument that part of the increase is toward Proposition 2. The administration’s initial eligible to count toward Proposition 2 debt estimate of these costs is $92 million in 2017-18 and payment requirements. Doing so could the Governor proposes setting aside $100 million free up as much as a few hundred million in Proposition 2 requirements for this purpose (as dollars in General Fund resources in shown in Figure 4). 2017-18. 6 Legislative Analyst’s Office www.lao.ca.gov 2017-18 BUDGET Options Could Fulfill Additional Counting Increased CalPERS and CalSTRS Requirements After May Revision. The Legislature Contribution Costs Problematic. As we noted could implement either of the above options by earlier, the state arguably could count some higher either: (1) reducing other currently proposed state costs associated with increased contributions repayments, or (2) funding additional Proposition 2 for CalPERS and CalSTRS toward Proposition 2. debt payment requirements in May if revenue This option may be allowable under one estimates, and therefore debt requirements, are interpretation of Proposition 2, but there is legal higher. uncertainty about this interpretation. Moreover, these additional costs will increase annually under LAO Comments current projections. Currently, for both pension We have outlined two alternatives for using systems, these increased General Fund costs may Proposition 2 debt payment requirements. We grow from as much as a few hundred million are not making any specific recommendations on dollars in 2017-18 to over $2 billion in 2021-22. If either of these options. However, the Legislature the state continued a practice of counting some of could implement either or both of them and free these payments toward Proposition 2, they could up hundreds of millions of dollars in General eventually consume the bulk of the required debt Fund resources in 2017-18. The Legislature could payments. use these additional funds to build more reserves, Counting These Debts Toward Proposition 2 address the Governor’s estimated budget problem, Means Fewer Resources for Other Debts. If 2017-18 or address other legislative priorities. Below, we Proposition 2 debt payment requirements are describe some of the trade-offs associated with close to current projections in May, the Legislature implementing these alternatives. could implement one or both of the alternative Strong Argument for Counting Weight Fee debt repayment options we discussed by reducing Loans Toward Proposition 2 Requirements. Of other currently proposed payments. This would the alternatives for debt payments, the option to achieve net General Fund savings, but beneficiaries redirect some of these requirements toward weight of the currently proposed debt payments could fee loans seems to have the strongest basis. This view this change unfavorably. For example, if option is consistent with the administration’s the Legislature chose to reduce special fund loan treatment of other loans under Proposition 2. It repayments, special fund fee payers may not see also represents a temporary use of Proposition 2 near-term benefits resulting from proposed loan resources. That is, within a few years these loans repayments (if the repayments were used to reduce could be fully paid off—in fact, potentially faster fees or increase services). Alternatively, if there are than now required if Proposition 2 funds are additional debt payment requirements in May due used. This would leave room for the Legislature to to higher revenue projections, the Legislature could address other debts with Proposition 2 resources in direct those additional payments toward one or the future. both of the debt repayment alternatives. www.lao.ca.gov Legislative Analyst’s Office 7 2017-18 BUDGET RESERVES Background remaining BSA deposits, and estimated deposit for 2017-18, will have been deposited pursuant to the State Has Two Budget Reserves. The state rules of Proposition 2. (The $2 billion optional BSA has two budget reserves: the Special Fund for deposit in 2016-17 included budget bill language Economic Uncertainties (SFEU) and the Budget implying that these funds are also deposited Stabilization Account (BSA). The SFEU is the pursuant to these rules.) Under Proposition 2, state’s discretionary budget reserve—that is, the the state must put money into the BSA until its Legislature at any time can appropriate funds in the total reaches a maximum amount of 10 percent of SFEU for any purpose by majority vote. Unlike the General Fund taxes (currently, about $12.5 billion SFEU, use of funds in the state’s rainy day fund— under the administration’s revenue estimates). the BSA—is more restricted. The State Constitution Building Reserves Allows State to Sustain has specific rules regarding how and when the state Future Spending Levels. Both of the state’s budget must make deposits into or may make withdrawals reserves help insulate the budget from situations from the BSA. Similar to the minimum debt where revenues underperform budget assumptions. payment requirements, these rules are detailed If the state faces a deficit, these reserves can earlier in Figure 2. delay—or even prevent—the state from making Components of $9.4 Billion in Total Reserves. difficult choices (including spending cuts or tax Under the administration’s current estimate of increases) to address a potential budget problem. As revenues, total reserve balances would reach such, building reserves during times of economic $9.4 billion by the end of 2017-18. Figure 6 shows expansion allows the state to sustain future the components of this reserve balance, including spending levels during times of economic distress. the composition of the BSA. In particular, the As described in the nearby box, the structure of BSA reserve includes $1.6 billion deposited in Proposition 2 directly aims to protect the state from 2014-15, before the enactment of Proposition 2. The these ups and downs in revenue collections. State Only Has Access to Proposition 2 Figure 6 Components of Total $9.4 Billion in Reserves BSA Funds During a Budget Emergency. Under Proposition 2, the Legislature can only reduce (In Millions) the BSA deposit, or make a withdrawal from the Budget Stabilization Account BSA reserve, in the case of a budget emergency. A 2014‑15 pre‑Proposition 2 BSA deposit $1,606 2015‑16 revised BSA deposit 1,814 budget emergency can only occur upon declaration 2016‑17 required BSA deposit 1,294 by the Governor. The Governor may call a budget 2016‑17 additional transfer to BSA 2,000 emergency in two cases: (1) a “fiscal emergency,” 2017‑18 estimated BSA deposit 1,156 Total, Proposed BSA Balance $7,869 which occurs if estimated resources in the current or upcoming fiscal year are insufficient to keep Special Fund for Economic Uncertainties Total, Proposed SFEU Balance $1,554 spending at the level of the prior three budgets adjusted for inflation and population or (2) a Total Reserve Balances $9,424 “disaster-related emergency,” which is in response BSA = Budget Stabilization Account and SFEU = Special Fund for Economic Uncertanties. to a disaster such as the declared emergency in 8 Legislative Analyst’s Office www.lao.ca.gov 2017-18 BUDGET How Proposition 2 (2014) Mitigates State Revenue Volatility Proposition 2 aims to protect the budget from periods when revenues underperform expectations. In particular, it sets aside monies from one of the most volatile components of state revenues—capital gains—by directing above average growth in this source into budget reserves and debt payments. It therefore mitigates revenue volatility by: (1) taking revenues “off the table” in good economic times and (2) building budget reserves that can be used during bad economic times to augment declining revenues. response to the situation at the Oroville Dam. In the a fiscal emergency calculation as part of the budget presence of a fiscal emergency, the Legislature may process. In fact, there are some uncertainties about appropriate funds from the BSA with a majority how such a calculation would be administered. vote. However, it may only withdraw the amount Figure 7 displays one version of such a calculation needed to maintain General Fund spending at the using the administration’s estimates of revenues highest level of the past three enacted budget acts, for 2016-17 and 2017-18. As shown in the figure, but no more than 50 percent of the BSA balance a fiscal emergency seems available in the 2017-18 in the emergency’s first fiscal year. In the case of calculation. Specifically, resources available in a disaster-related emergency, the Legislature may 2017-18 are about $2 billion lower than the adjusted use the amount of funds required to address the budget for 2016-17. That is in large part the result emergency. Proposition 2 does not specify a deadline of the Governor’s projections of slow growth in for the Governor to call a budget emergency. revenues between 2016-17 and 2017-18. Governor Does Not Propose Using BSA to Can the Legislature Use Funds From the Cover Budget Problem. In theory, if the Governor BSA to Address the Budget Shortfall? were to call a fiscal emergency, the Legislature Given the current budget problem identified Figure 7 by the Governor, some Fiscal Emergency in 2017-18 Seems Available have asked whether the Under Administration’s Estimates BSA could be accessed (In Millions) under the fiscal emergency 2016-17 Calculation 2014-15 2015-16 2016-17 provisions of Proposition 2. Adjusted budget for fiscal yeara $113,845 $118,724 $122,468 In this section, we address Resources available for 2016‑17b 122,809 122,809 122,809 Adjusted budget greater than resources available? No No No this question. Amount of budget emergency Fiscal Emergency 2017-18 Calculation 2014-15 2015-16 2016-17 Seems Available Under Adjusted budget for fiscal yeara $117,380 $122,410 $126,271 Governor’s Revenue Resources available for 2017‑18b 124,075 124,075 124,075 Estimates. Unlike other Adjusted budget greater than resources available? No No Yes Amount of budget emergency 2,196 calculations, Proposition 2 a Equals enacted budget total expenditures for fiscal year grown for change in inflation (as measured by the California Consumer does not require the Price Index) and population. b Equals prior‑year balance plus revenues and transfers minus encumbrances. administration to produce www.lao.ca.gov Legislative Analyst’s Office 9 2017-18 BUDGET could appropriate about $2 billion of BSA funds LAO Comments with a majority vote of both houses. However, the We have outlined the reasons the Legislature Governor has not called a fiscal emergency and, as cannot access the BSA in response to a fiscal such, the Legislature is precluded from using this emergency to address the Governor’s estimated option. (We would note the Governor could call budget problem. We also pointed out that the a budget emergency—either a fiscal emergency or Legislature arguably has some legal authority to use a disaster-related emergency—later in the budget a portion of the BSA balance without a declaration process.) of a budget emergency by the Governor. Strong Argument Legislature Has Access to Recommend Legislature Not Use BSA Funds Pre-Proposition 2 BSA Balance. There is a strong to Cover a Budget Shortfall. At this time, we do argument that the $1.6 billion deposited in the BSA not recommend the Legislature use BSA funds to in 2014-15 is not governed by the Proposition 2 cover a shortfall in response to fiscal conditions rules. This means the Legislature arguably has even if it has the legal authority to do so. As we greater control over these funds than it has over noted in The 2017-18: Overview of the Governor’s other funds in the BSA and potentially could access Budget, the Legislature may want to set its target for these funds even without the declaration of a state reserves at—or preferably above—the level the budget emergency by the Governor. Governor now proposes. Withdrawing funds from the BSA to address a budget shortfall now would hamper the state’s ability to build reserves, which will be needed in the face of the next recession. 10 Legislative Analyst’s Office www.lao.ca.gov 2017-18 BUDGET www.lao.ca.gov Legislative Analyst’s Office 11 2017-18 BUDGET LAO Publications This brief was prepared by Ann Hollingshead, and reviewed by Jason Sisney. The Legislative Analyst’s Office (LAO) is a nonpartisan office that provides fiscal and policy information and advice to the Legislature. To request publications call (916) 445-4656. This brief and others, as well as an e-mail subscription service, are available on the LAO’s website at www.lao.ca.gov. The LAO is located at 925 L Street, Suite 1000, Sacramento, CA 95814. 12 Legislative Analyst’s Office www.lao.ca.gov