California's budget is on track for multibillion dollar surpluses in the coming years, the Legislature's nonpartisan fiscal analyst said Wednesday in an upbeat assessment of the state's fiscal picture.
An improving economy and continuing revenue from voter-approved tax increases in 2012 have left state finances in strong shape, Legislative Analyst Mac Taylor wrote in his office's five-year fiscal outlook released this morning.
The state is projected to have a $5.6 billion reserve by June 2015. Taylor, though, offered a note of caution in the report, the second-straight rosy review of state finances after years of red-ink warnings.
"Despite the large surplus that we project over the forecast period, the state's continued fiscal recovery is dependent on a number of assumptions that may not come to pass," he wrote.
Taylor projected annual surpluses to grow more slowly after the 2016-17 budget year, as tax increases from Proposition 30, Gov. Jerry Brown's ballot initiative last year to raise taxes, phase out. The impact will be felt over several years, however, and Taylor told reporters "you don't have one really dramatic year in which revenues fall off."
The revenue forecast remains highly dependent on capital gains. Taylor said the market "is not out of line like it was in the dot com boom."
Brown has taken steps in recent weeks to temper spending expectations ahead of the release of his annual spending plan in January, and his administration continued to urge caution Wednesday.
"Recent history reminds us painfully of what happens when the state makes ongoing spending commitments based on what turn out to be one-time spikes in capital gains," Michael Cohen, Brown's director of finance, said in a prepared statement. "We're pleased that the analyst's report shares the governor's view that discipline remains the right course of action. The focus must continue to be on paying down the state's accumulated budgetary debt and maintaining a prudent reserve to ensure that we do not return to the days of $26 billion deficits."
Editor's note: This post was updated at 1 p.m. to include video and comments from Taylor and Cohen.