November 20, 2020
LAO Releases Fiscal Outlook Report
On Wednesday, November 18, 2020, the Legislative Analyst’s Office (LAO), the Legislature’s nonpartisan fiscal and policy advisor, released its annual fiscal outlook report which includes an analysis on the Proposition 98 forecast ahead of the release of Governor Gavin Newsom’s 2021–22 State Budget Proposal in January.
The LAO estimates that, due to the dramatic recovery in “Big Three” taxes above the 2020–21 Enacted State Budget levels, the 2019–20 and 2020–21 Proposition 98 minimum guarantees could grow by $1.6 billion and $13.1 billion, respectively, when compared with the 2020–21 Enacted State Budget. Growth at this rate would result in a 2020–21 minimum guarantee that eclipses the historic all-time high in education funding.
Given the good fiscal environment, the LAO offers lawmakers two key considerations for how to spend the projected surplus. The first consideration is that the Legislature pay down all of the budget deferrals and cover the cost of an estimated cost-of-living-adjustment (COLA) in 2021–22, which is estimated to be 1.14%. This would leave the Legislature with $4.2 billion for new commitments. Secondly, the LAO notes that pension costs are projected grow quite significantly in 2022–23. The California State Teachers’ Retirement System and the California Public Employees’ Retirement System employer rates are projected to grow more than 2% and nearly 4%, respectively. The related cost increases range from $1.3 billion to $1.7 billion, which would likely exceed the COLA.
We will have to wait until January, when the Newsom Administration releases its State Budget Proposal and revenues estimates, to see whether the Department of Finance estimates align with the LAO.
AB 218 Information from SELF
Assembly Bill (AB) 218 (Chapter 861/2019) was signed into law by Governor Newsom last fall. The bill extends the statute of limitations for commencement of legal action for childhood sexual assault to forty years of age, or five years from discovery of the injury; provides enhanced damages for a cover up, as defined, of the assault; and provides a three-year window in which expired claims could be revived.
To prepare schools and colleges for the new law, the Schools Excess Liability Fund (SELF), created a “What You Should Know About AB 218” document that provides information on what community college districts and local educational agencies should know about the impact of AB 218.
Due to the Thanksgiving holiday, we will not be providing the ACCCA Update next week unless there is breaking news; we will return to our regular production schedule the week ending December 4, 2020.