California Has Huge Budget Surplus, But Does Pension Debt Spoil The News?

The nonpartisan Legislative Analyst's Office is forecasting a $7 billion budget surplus for California next year butlawmakers are being warned not to spend it all.

The LAO report shows California has enough money to make it through an average economic recession and projects the surplus will grown to $18.3 billion by the end of the 2021 fiscal year.

Ultimately the size of the surplus will depend on if President Trump decides to allow California to tax the groups managing the state's Medicaid plans. Revenue from that tax could generate up to $2 billion if approved by the federal government.

The LAO also noted that economic indicators suggest the economy could slow down. That's why the report is recommending that state lawmakers spend no more than $1 billion of the total surplus on existing programs.

However, the rosy budget picture isn't quite so rosy when considering the state's pension debt. Watchdog Transparent California earlier this month reported that approximately 80,000 retires are now getting $100,000 or more in pension payments from the California Public Employees Retirement System. That number is more than double what it was six years ago, according to Santa Cruz Sentinel. Those retirees reportedly accounted for 20 percent of the nearly $52 billion paid for all pensions last year alone.

Still, Governor Gavin Newsom said the LAO report highlights the strength of the California economy.

"This budget assessment points to a broader truth. California is now the fifth-largest economy in the world," said Newsom. "Our state is proving what big-hearted, progressive governance can look like – all without breaking the bank. President Trump talks a lot about America’s economic growth under his presidency, but when you look behind the numbers, you see that it’s California’s growth that has provided the economic rocket fuel for the nation."

California Senate President pro Tempore Toni G. Atkins of San Diego issued a statement on the LAO report.

"Today’s multi-year forecast continues to prove that the Legislature has been a strong steward of California’s finances," Atkins said in her statement. The days of the perennial budget crisis – even during good economic times – are thankfully behind us. For nearly a decade, our responsible approach of building reserves and paying down debts, while also making bold progress for the people of California, has strengthened our state."


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