“Early next week, we plan to release our multiyear budget outlook that will include our assessment of the Governor’s revenue and spending estimates. Tentatively, our revenue estimates are a few billion dollars higher than the administration’s new estimates for the 2015-16 fiscal year. Our initial calculations suggest that most of these higher revenues will be consumed by higher spending requirements for schools and community colleges under Proposition 98 and higher budget reserve and debt payment requirements under Proposition 2. Our revenue estimates would, however, leave the Legislature with more money for additional reserves, debt payments, or new budget commitments.
. . . We are clearly on the upward slope of the state’s revenue roller coaster. But just as the state’s revenue picture has improved significantly over just a few months, it can just as easily reverse course with a stock market or economic downturn. There is little indication that such a downturn will occur soon, but as we discussed in our November Fiscal Outlook, such slumps can occur with little warning. Restraint in approving new ongoing programs is key to preventing an unsustainable spending base.
. . . If the Legislature adopts our revenue estimates, we advise caution in committing to new ongoing spending programs or tax reductions.”
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