The 2023-24 Budget: Overview of the Governor's Budget

2023-24 BUDGET The 2023-24 Budget: Overview of the Governor’s Budget GABRIEL PETEK | LEGISLATIVE ANALYST JANUARY 2023 www.lao.ca.gov i 2023-24 BUDGET ii LEGISLATIVE ANALYST’S OFFICE 2023-24 BUDGET Executive Summary Governor’s Emphasis on Spending Solutions to Address Budget Problem Is Prudent. Both our office and the administration project that the state faces a manageable budget problem this year. The Governor addresses the budget problem primarily with spending-related solutions, as shown in the figure below. Notably, the Governor does not propose using any reserves. This approach is prudent given the downside risk to revenues posed by the current heightened risk of recession. We recommend the Legislature maintain this approach during its own planning process. Recommend Legislature Plan for Larger Budget Problem. Our estimates suggest that there is a good chance that revenues will be lower than the administration’s projections for the budget window, particularly in 2022-23 and 2023-24. Given this risk, we recommend the Legislature: (1) plan for a larger budget problem and (2) address that larger problem by reducing more one-time and temporary spending. Taking these steps would allow the state to mitigate the heightened risk of revenue shortfalls. The Legislature need not adopt the Governor’s spending solutions, however. Recent budgets have allocated or planned tens of billions of dollars for one-time or temporary spending purposes in 2021-22, 2022-23, and 2023-24. The Legislature can select an entirely different set of spending solutions to address the budget problem. To develop its budget, we recommend the Legislature evaluate recently approved augmentations and only maintain those augmentations that meet certain criteria. Governor’s Budget Includes $18 Billion in Budget Solutions (In Billions) $20 Revenue Related 18 16 Cost Shift 14 12 10 Delay $18 Billion Budget 8 Spending Problem 6 Solutions Trigger 4 Restorations 2 Reduction Recommend the Legislature’s Budget Not Include Future Deficits. While the Governor’s budget is balanced under the administration’s estimates for 2023-24, this is not the case for future years. Specifically, the administration forecasts operating deficits ranging from $4 billion to $9 billion over the multiyear period. We recommend the Legislature avoid enacting a budget that plans for future deficits. To maintain budget balance, the Legislature could convert some spending-related delays to reductions instead. Alternatively, the Legislature could add new out-year trigger reductions—in which spending triggers off under certain conditions—or by using other budget solutions, such as revenue increases or cost shifts. www.lao.ca.gov 1 2023-24 BUDGET 2 LEGISLATIVE ANALYST’S OFFICE 2023-24 BUDGET Chapter 1 INTRODUCTION On January 10, 2023, Governor Newsom initial review as of January 12. In the coming weeks, presented his proposed state budget to the we will analyze the plan in more detail and release Legislature. In this report, we provide a brief several additional budget analyses. summary of the Governor’s budget based on our THE BUDGET PROBLEM A budget problem—also called a deficit—occurs were not approved in any budget-related legislation. when resources for the upcoming budget are Consequently, we do not consider withdrawing the insufficient to cover the costs of currently authorized inflation set-aside or shifting back to lease revenue services. Because the State Constitution requires bonds from cash to be budget solutions. (That is, the state to pass a balanced budget, the Governor in our view, these costs would not have occurred must propose solutions when the administration absent legislative action and as a result do not estimates the state faces a budget problem. The contribute to the budget problem the Legislature state has many types of solutions—or tools— faces today.) for addressing a budget problem, but the most Comparison to LAO November Outlook. In our important include: reserve withdrawals, spending Fiscal Outlook released in November 2022, we reductions, revenue increases, and cost shifts (for anticipated the state would face a $24 billion budget example, between funds). Due to a deteriorating problem, somewhat higher than the $18 billion revenue picture relative to expectations from budget problem we estimate the Governor June 2022, both our office and the administration addressed. Relative to our November outlook, the have anticipated the state faces a budget problem administration’s estimates include: in 2023-24. • $14 Billion in Higher Revenues. The administration’s estimates of revenues WHAT IS THE BUDGET PROBLEM? (excluding transfers, both between state We Estimate the Governor Solved an funds and from the federal government) are $18 Billion Budget Problem. We estimate the $13.6 billion higher across the three-year Governor’s budget addressed an $18 billion budget window compared to our estimates budget problem. This is somewhat lower than the in November. This reduces the size of the $22 billion budget problem the administration has budget problem. referenced. There are two main sources of this • $3 Billion in Higher School and Community difference. In both cases, the difference stems College Spending. Reflecting these higher from what is considered baseline spending—that revenue estimates, the administration’s is, what spending was approved in prior budgets. estimates of constitutionally required General Specifically, the administration views the following as Fund spending on K-14 education is about baseline spending: a $3 billion unallocated set-aside $2.6 billion higher than our November for inflation-related costs and a shift of $1.4 billion estimates. This partially offsets the revenue in authorized capital outlay projects from lease increase described above, increasing the size revenue bonds to cash. In contrast, we do not view of the budget problem. these items as baseline spending because they www.lao.ca.gov 3 2023-24 BUDGET • A $4 Billion Set-Aside in the SFEU. • $800 Million in Other Differences. Across The Governor proposes the Legislature enact the rest of the budget, our estimates of a year-end balance in the Special Fund for baseline spending—for example, for caseload Economic Uncertainties (SFEU) of $3.8 billion. growth, federal reimbursements, and The Legislature can choose to set the SFEU statutory cost increases—and constitutional balance at any level above zero and so our requirements—for example, for infrastructure Fiscal Outlook did not assume a specific and deposits into reserves—differ, on net, by balance. (Recent budgets have enacted SFEU $800 million. Relative to our estimates, this balances around $2 billion to $4 billion. The reduces the size of the budget problem. SFEU is used to cover costs of unanticipated expenditures.) Relative to our November HOW DOES THE GOVERNOR estimates, this set-aside increases the size of PROPOSE SOLVING THE BUDGET the budget problem. PROBLEM? • $2 Billion in Discretionary Spending. The Governor’s budget also includes $2 billion Figure 2 summarizes the budget solutions that in discretionary spending proposals that are this section describes in detail. The Governor’s not currently reflected under current law or budget solutions focus on spending. They total policy. Figure 1 shows how these proposals $13.6 billion and represent nearly three-quarters are distributed by program area. (Appendix of the total solutions. In addition, the Governor’s 3 [online], also provides a list of these budget includes $4.3 billion in cost shifts, which proposals.) As the figure shows, most of the represent nearly one-quarter of the total. Notably, discretionary increases are to finance some the Governor’s budget does not propose using any capital outlay projects with cash instead of reserves to address the budget problem. lease revenue bonds. This increases the size Spending-Related Solutions of the budget problem. The Governor’s $13.6 billion in spending-related budget solutions can be categorized into three types: reductions, delays, and trigger restoration. Nearly all of Figure 1 these solutions would apply to Governor’s Budget Includes one-time and temporary spending. $2 Billion in Discretionary Proposals Figure 3 shows how the spending (In Millions) solutions are broken out across program area and type. Appendix 1 (online) provides a list of these Cash Financing Capital Outlay proposed solutions. The remainder of this section describes each of Other these types in turn. Resources and $7.1 Billion in Delayed Environment Spending. We define a delay as Health an expenditure reduction that occurs in the budget window Criminal Justice (2021-22 through 2023-24), but Human Services has an associated expenditure increase in a future year of the Higher Education multiyear window (2024-25 100 200 300 400 $500 through 2026-27). That is, the spending is moved to a future year. 4 LEGISLATIVE ANALYST’S OFFICE 2023-24 BUDGET About half of the Governor’s Figure 2 spending-related solutions are delays. Most of the spending Governor’s Budget Includes delays are in higher education, $18 Billion in Budget Solutions health, and broadband. They result (In Billions) in net cost increases by 2024-25, with the largest cost increases $20 occurring in 2025-26. Revenue Related $3.8 Billion in Spending 18 Reductions Subject to Trigger 16 Cost Shift Restoration. The Governor’s 14 budget proposes making nearly 12 one-third of all spending-related solutions subject to trigger 10 Delay $18 Billion Budget restoration language. Under this 8 Problem Spending proposed language, program Solutions 6 spending that otherwise would Trigger have occurred in 2023-24 would 4 Restorations not be allocated as part of the 2 Reduction June budget act. However, if in January 2024 the administration estimates there are sufficient Figure 3 Most Spending Solutions Are Trigger Restorations or Delays Resources and Environment Transportation Higher Education Health Reduction Other Broadband Total Solutions UI Loan Delay School Facilities Trigger Restorations Human Services Housing and Homelessness 500 1,000 1,500 2,000 2,500 3,000 $3,500 UI = Unemployment Insurance. www.lao.ca.gov 5 2023-24 BUDGET resources available to fund these expenditures, Governor’s budget include: (1) shifting $1.5 billion in those programs would be restored halfway through costs for zero-emission vehicles from the General the fiscal year. Many of the spending solutions in Fund to the Greenhouse Gas Reduction Fund, natural resources and environment, transportation, (2) making $850 million in loans from special funds and housing and homelessness are subject to this to the General Fund, (3) temporarily transferring trigger restoration language. $300 million from the health care affordability $2.6 Billion in Spending Reductions. We reserve fund to the General Fund, and (4) shifting define a spending reduction as the elimination of an $500 million in transportation-related costs from augmentation previously approved under current the General Fund to transportation-related special law or policy. The Governor’s budget includes funds. Appendix 2 (online) provides a full list of nearly $3 billion in reductions, the largest of which these proposed cost shifts. is withdrawing a discretionary principal payment Revenue Related on state’s unemployment insurance loan (which We estimate the Governor’s budget includes otherwise is paid by employers’ payroll taxes). about $350 million in revenue-related solutions. Less than 20 percent of the total spending solutions The key item in this category is a proposal for are reductions. the state to reauthorize a tax on managed care Cost Shifts organizations that draws down additional federal In addition to spending solutions, we estimate funds and offsets costs in Medi-Cal. While the the Governor’s budget includes $4.3 billion in fiscal impact of this reauthorization would be small cost shifts. Cost shifts occur when the state in the budget window—an estimated $300 million moves costs between entities or fund sources. in 2023-24—the effect would be much larger in For example, shifting spending from the General future years, rising to roughly $2 billion in General Fund to special funds or, as has been done in Fund savings as early as 2024-25. (Reauthorizing prior budgets, shifting costs from the state to local this tax would require federal approval.) governments. Major cost shift proposals in the (Appendix 2 [online] also includes a list of proposed revenue-related solutions.) BUDGET CONDITION In this section, we describe the Figure 4 overall condition of the General General Fund Condition Summary Fund budget after accounting for (In Millions) the Governor’s budget proposals and solutions. We also describe 2021-22 2022-23 2023-24 the condition of the school and Revised Revised Proposed community college budget. Prior-year fund balance $41,102 $52,713 $21,521 Revenues and transfers 233,891 208,883 210,174 General Fund Budget Expenditures 222,280 240,076 223,614 Figure 4 shows the General Ending fund balance $52,713 $21,521 $8,081 Encumbrances 4,276 4,276 4,276 Fund condition based on the SFEU balance 48,437 17,245 3,805 Governor’s proposals and using Reserves the administration’s estimates BSA $19,867 $21,487 $22,398 and assumptions. Under these SFEU 48,437 17,245 3,805 estimates and assumptions, the Safety net 900 900 900 state would end 2023-24 with Total Reserves $69,204 $39,632 $27,103 $3.8 billion in the SFEU. BSA = Budget Stabilization Account and SFEU = Special Fund for Economic Uncertainties. 6 LEGISLATIVE ANALYST’S OFFICE 2023-24 BUDGET Under Governor’s Budget, Reserves Would State Appropriations Limit (SAL) Estimates Total $27 Billion by End of 2023-24. Under the Still Unknown. In recent years, the SAL has placed Governor’s budget, general purpose reserves constraints on the Legislature’s budget choices. would total $27 billion by the end of 2023-24. (For more information about the SAL, see our In addition, the state would have $8.5 billion in report, The 2022-23 Budget: Initial Comments on the School Reserve, available only for school and the State Appropriations Limit Proposal.) Under community college programs. Under the Governor’s our November estimates of revenues and spending, proposals, the state would continue to make the state would have a good amount of room its otherwise constitutionally required deposits, under the limit in the budget window. However, the including a deposit of $911 million into the Budget administration’s revenue and spending estimates Stabilization Account (BSA) and $365 million into are different than ours, which is likely to yield the School Reserve in 2023-24. The deposits could differences in the SAL calculation. As of this writing, be suspended if the Governor declared a budget we have not yet received information from the emergency, as we describe in the nearby box. administration on these estimates. Administration Plans for Multiyear Operating School and Community College Budget Deficits. The Governor’s budget also includes estimates of multiyear revenues and spending. Proposition 98 Minimum Guarantee Down Under those projections, and the Governor’s Over Budget Window. The State Constitution sets a minimum annual funding requirement for schools budget proposals, the state faces operating deficits and community colleges. The minimum guarantee of $9 billion in 2024-25, $9 billion in 2025-26, and is met with a combination of General Fund and local $4 billion in 2026-27. These figures represent future property tax revenue. Compared with the estimates budget problems. That is, if the Governor’s budget included in the June 2022 budget plan, the projections are accurate, the state would have to administration revises its estimates of the minimum address deficits of these amounts in each of these guarantee up $178 million in 2021-22 and down future years. $3.4 billion in 2022-23. The increase in 2021-22 is primarily attributable to higher local property tax Budget Emergency Calculation Under Governor’s Budget Legislature Can Make a BSA Withdrawal Under Two Conditions. The Legislature can only suspend mandatory deposits or make withdrawals from either of its two constitutional reserves— the Budget Stabilization Account (BSA) and the School Reserve—if the Governor declares a budget emergency. The Governor may declare a budget emergency in two cases: (1) if estimated resources in the current or upcoming fiscal year are insufficient to keep spending at the level of the highest of the prior three budgets, adjusted for inflation and population (a “fiscal budget emergency”), or (2) in response to a natural or man-made disaster. Legislature Cannot Access Most of Its Constitutional Reserves Without a Fiscal Emergency Declaration by the Governor. Under our interpretation of the constitutional rules and our estimates using the administration’s revenue and economic projections, a fiscal emergency would be available in 2023-24, but not for 2022-23. (In the case of a fiscal emergency, the Legislature only can withdraw the lesser of: [1] the amount of the budget emergency, or [2] 50 percent of the BSA balance.) However, because the Governor did not declare a fiscal emergency, the Legislature cannot make these withdrawals to address the budget problem. That said, there is a small “optional” balance in the BSA (which was not deposited pursuant to the constitutional rules), which mostly likely could be accessed by the Legislature without a fiscal emergency declaration by the Governor. This optional balance totals $1.8 billion. www.lao.ca.gov 7 2023-24 BUDGET revenue, while the decrease in 2022-23 primarily $1.4 billion in spending reductions. Most of the reflects lower General Fund revenue estimates. spending increases are to (1) cover the cost of For 2023-24, the administration estimates the providing an 8.13 percent statutory cost-of-living minimum guarantee is $108.8 billion—$1.5 billion adjustment (COLA) for school and community below the 2022-23 level enacted last June. college programs ($5.5 billion) and (2) continue Budget Includes Additional School and planned program expansions ($920 million). Community College Proposition 98 Spending. The cost of this new spending is offset by the Although the minimum guarantee decreases over Governor’s proposals to reduce previously the budget period, funding is available for spending approved one-time funding for (1) the Arts, Music, increases due to the expiration of one-time and Instructional Materials Discretionary Block initiatives and lower-than-anticipated program Grant by $1.2 billion and (2) community college costs. The Governor’s budget includes a net of facilities maintenance and instructional equipment $6 billion in new Proposition 98 spending—a total by $213 million. of $7.4 billion in spending increases, offset by COMMENTS Budget Year revenues are more likely to be higher, not lower, than their current projections. Given the greater Governor’s Emphasis on Spending Solutions, downside risk, however, we recommend the Instead of Reserves, Is Prudent. The Governor’s Legislature: (1) plan for a larger budget problem and budget addresses the estimated budget problem (2) address that larger problem by reducing more without using funds from the state’s reserves. one-time and temporary spending. If the Legislature Moreover, the Governor does not suspend the wanted to, it could make these spending reductions 2023-24 deposit into the BSA, which could subject to trigger restorations. Taking these steps otherwise occur if a fiscal emergency were declared would allow the state to mitigate the heightened risk (see box on page 7). The administration noted of revenue shortfalls. Moreover, developing a larger that, if revenues decline further, using reserves set of potential budget solutions now allows the would be considered, but for now relies only on Legislature to do so deliberately rather than under other types of budget solutions—particularly the pressure of the May Revision. spending-related reductions and delays. This approach is warranted given: (1) the manageable Proposal Generally Maintains Spending size of the budget problem and (2) the downside on Health and Human Services, but Reduces risk to revenues posed by the presently heightened Other Legislative Priorities. In general, the risk of recession. (For a more on this issue, see our Governor’s budget does not make large reductions report: The 2023-24 Budget: California’s Fiscal to health and human services programs. Rather, Outlook.) We recommend the Legislature maintain the Governor’s spending-related reductions, this approach during its own planning process. including reductions with trigger restorations, are concentrated in natural resources, environmental Recommend the Legislature Plan for a Larger protection, and transportation, areas which Budget Problem by Identifying More Spending also received large one-time and temporary Reductions. Our estimates suggest that there is a augmentations in recent budgets. (For more good chance that revenues will be lower than the information on recent augmentations, please see: administration’s projections for the budget window, How Program Spending Grew in Recent Years.) particularly 2022-23 and 2023-24. Nonetheless, the Spending solutions in these areas might be Governor’s budget trigger restoration proposals warranted because these programs: (1) have other implicitly place more emphasis on revenue upside— funding to at least partially accomplish some of suggesting the administration anticipates that 8 LEGISLATIVE ANALYST’S OFFICE 2023-24 BUDGET the intended outcomes and (2) still would receive Across the rest of the budget, statutory and other sizeable augmentations. However, some of the automatic inflation adjustments for programmatic specific reductions the Governor is proposing spending are more limited. While the Governor’s are in areas where the Legislature has signaled budget funds those inflation adjustments that exist clear priorities. under current law, in many program areas, there are Due to Budget Problem, New Proposals no such automatic adjustments. As the Legislature Require Reductions to Planned Spending. works to address the budget problem, we suggest In addition to addressing a budget problem, the policymakers consider the unique impacts of Governor’s budget proposes $2 billion in new inflation on each of the state’s major spending discretionary spending mainly in capital outlay programs in conjunction with possible budget financing, resources and environment, and other solutions. (See our report, The 2023-24 Budget: miscellaneous program areas. Because of revenue Considering Inflation’s Effect on State Programs, shortfalls, these new spending amounts contribute for more information.) to a larger budget problem and necessitate Multiyear additional budget solutions. That is, for each dollar of new proposals, another dollar of solutions would Although Timing Differs, LAO and be required. While the Legislature might share some Department of Finance Revenue Estimates Very of these priorities, it need not adopt all, or even any, Close… The Governor’s budget downgrade to the revenue outlook over the next several years is very of the associated proposals. Rejecting them would similar to the one in our Fiscal Outlook. Although the reduce the budget problem and the number of timing of revenue shortfalls is somewhat different, solutions necessary. the overall revenue decline through 2026-27 is very Recommend Legislature Evaluate Recent similar. Across all six years of the budget window Augmentations and Consider Other Budget and multiyear period, the administration’s estimates Solutions. Recent budgets have allocated or of revenues from the state’s three largest taxes are planned tens of billions of dollars for one-time $108 billion lower than the budget act, very similar and temporary spending purposes in 2021-22, to our Fiscal Outlook estimate of $101 billion. 2022-23, and 2023-24. The Governor’s budget identifies one set of recent augmentations to …But Governor’s Spending Plan Relies on reduce or delay in order to address the budget More Resources Being Available. The Governor’s budget includes operating deficits ranging from problem. The Legislature can select entirely $4 billion to $9 billion over the multiyear period. different spending solutions. To assist the This means that, if the administration’s revenue Legislature in this effort, we have provided a estimates are accurate, further budget solutions list of large augmentations provided in recent in these amounts will be required in those years. budgets in Appendix 4 (online) and a set of criteria If revenues are lower than the administration for evaluating them for reduction or delay in currently projects, even more reductions would “Chapter 2” of this report. The Legislature could be needed. apply these criteria through its budget oversight hearings throughout the next few months. Recommend the Legislature’s Budget Not Include Future Deficits. In contrast to Proposal Maintains Statutory COLA the Governor’s approach, we recommend the Adjustments, but Does Not Include Other Legislature avoid enacting a budget that plans for Inflation-Related Augmentations. Due to future deficits. A key way to accomplish this would differences in law and policy across the budget, the be by reducing proposed spending delays and state accounts for inflation differently in the school making more spending-related reductions instead. and community college budget versus the other However, the Legislature also could address future programs. In particular, school and community year deficits by adding trigger reductions (rather college programs receive an annual COLA under than restorations)—to trigger off more multiyear statute—8.13 percent this year. spending if needed—or by using other budget solutions, such as revenue increases or cost shifts. www.lao.ca.gov 9 2023-24 BUDGET Chapter 2 EVALUATING RECENT AUGMENTATIONS FOR REDUCTION OR DELAY The Governor’s budget proposes one possible …Identify More Solutions Than the list of spending-related solutions, but there Governor’s Budget. We recommend the are many other choices the Legislature could Legislature identify more than $14 billion in make. In developing an alternative approach, spending reductions and delays. To hedge we recommend the Legislature treat all recent against possible lower revenues in May, we also one-time or temporary General Fund augmentations recommend the Legislature plan for a larger budget (outside of the school and community college problem by identifying more than $6 billion in budget) like new proposals and reevaluate them spending reductions. Identifying these solutions in light of the budget problem. To determine now gives the Legislature more time to weigh these which augmentations to maintain, we recommend difficult choices carefully. the Legislature use the criteria laid out below. Criteria Specifically, the Legislature could direct the administration to justify these proposals according This section lays out the criteria we recommend to these criteria in its presentations to the budget the Legislature use to evaluate whether recent committees. Under this approach, only those augmentations should be maintained in light of the proposals that meet most of the criteria would be budget problem. (These criteria are intended to appropriated as part of this year’s budget package. apply to General Fund discretionary augmentations outside of the school and community In Appendix 4 (online) we list all of the large college budget.) one-time and temporary augmentations provided by prior budgets in 2021-22, 2022-23, and 2023-24. • The Augmentation Has a Clear Goal The Legislature can use this list as a starting place That Aligns With Legislative Priorities. for creating its own proposed solutions. Assess whether the augmentation targets a Start With 2023-24 Augmentations… well-defined policy problem that is a priority of We recommend the Legislature first review the Legislature to address. augmentations planned for 2023-24 as these funds • The Projects or Activities Are Specific have not been disbursed to departments or other and Address the Legislature’s Goal. entities, like local governments. Consequently, Assess whether prior budget plans aligned reducing or pausing the funding would not the specific projects and activities with impact ongoing services. Moreover, while some the Legislature’s policy goals. If not, the of these augmentations continue temporary Legislature could consider whether to delay or programs from recent years, many of them start reduce this spending until more planning can entirely new programs and initiatives. Delaying or be done. reducing funding for these initiatives would cause • The Underlying Needs Have Not Changed. limited disruption. In some cases, since the augmentation After reviewing 2023-24 augmentations, we was approved, the state might have new recommend the Legislature also reevaluate certain information or events might have developed 2021-22 and 2022-23 augmentations. In some such that the underlying need for the program cases, funding may not yet be disbursed or the or policy has changed and funding could total amount required may be less than anticipated. be reduced. (In many cases, however, the funds may not be available for reversion.) 10 LEGISLATIVE ANALYST’S OFFICE 2023-24 BUDGET • Early Indications Show That the Projects • Pausing or Delaying the Appropriation or Activities Are Meeting Their Goals. Would Have Significant Negative In cases where one-time or temporary Distributional Impacts on Populations spending in 2023-24 continues prior similar of Concern. In some cases, pausing or efforts, evaluate whether the funding has been delaying an augmentation could raise effective and whether the administration has equity concerns, for instance if doing so been implementing the program with fidelity would disproportionately reduce services or toward the Legislature’s vision. assistance to populations of concern. In these • The Involved Entities Have the Capacity cases, pausing or delaying the augmentation to Administer the Initiative. There are a could exacerbate an underlying disparity. few reasons that capacity concerns might • The Augmentation Does Not Duplicate arise, creating opportunities for reevaluating Federal or Special Fund Activities. spending. Some departments or other entities In some cases, legislative action might received multiple rounds of funding for the have supplemented, or even duplicated, same purpose over several years. In cases federal funding provided at other points where an entity has encountered issues in time. These too might provide cases distributing early rounds of funding, the for reevaluation. (That said, if the state later rounds likely could be paused without dollars are pulling down additional federal much near-term impact on the program. resources, greater scrutiny should be applied In other cases, departments and other in considering a pause.) In other cases, the entities have received multiple rounds of Legislature might have the flexibility and funding for different programs and projects, funding capacity to redirect special fund straining capacity across program areas. revenues to a General Fund purpose. These also could provide cases where the • The Projects or Activities Primarily Meet Legislature might wish to pull back program an Acute Need. To the extent a program only funding, allowing the entity to focus on the has longer-term benefits, there might be an highest-priority areas. argument for pausing or delaying it while the opportunity costs of those funds are higher— and could be directed toward serving the state’s more acute needs. www.lao.ca.gov 11 2023-24 BUDGET APPENDICES Note: In the online version of this report, we plan to include a series of Appendix tables that have detailed information on the Governor’s proposed solutions and discretionary spending choices in the 2023-24 Governor’s Budget. In addition, we include tables that identify large one-time and temporary augmentations included in recent budgets. 12 LEGISLATIVE ANALYST’S OFFICE 2023-24 BUDGET www.lao.ca.gov 13 2023-24 BUDGET LAO PUBLICATIONS This report was prepared by Ann Hollingshead, with contributions from analysts across the office, and reviewed by Carolyn Chu and Anthony Simbol. 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 report 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, California 95814. 14 LEGISLATIVE ANALYST’S OFFICE