A surprisingly fast economic rebound advantaging higher-income Californians will create a huge unexpected state budget surplus that will provide an unexpected $13.1 billion in one-time revenue for K-12 schools and community colleges in the fiscal year starting July 1, 2021, the Legislative Analyst’s Office reported on Wednesday.
While tempering its forecast because of the pandemic’s unpredictability — “Despite being our best assessment, our main forecast will be wrong to some extent” — the LAO’s report documents what it calls a “remarkable” turnaround. The LAO’s annual projection precedes the governor’s budget by about two months, but usually is an accurate forecast of revenues and spending obligations.
K-12 schools and community colleges are entitled to about 40 percent of General Fund revenue, which could exceed forecasts by $26 billion, the LAO forecasts. That’s the median projection, because, with so many variables at play, the surplus could be as low as $12 billion or as high as $40 billion, the LAO said.
The projected $13.1 billion increase for Proposition 98, the formula that determines revenue for K-12 schools and community colleges, would be 18.5% next year. It would far surpass the previous record of $6.3 billion and 10.3% in 2014-15, the LAO said.