Projecting California's Fiscal Future

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Stephen J. Carroll
Rand, 1995 - Political Science - 96 pages
This paper presents findings of a study that analyzed the trends that will shape the California budget over the next decade. The study assumed that current demographic and economic trends, tax policies, and mandated spending programs will continue through the next decade, and projects their implications for state general-fund revenues and spending through 2005. Three trends appear likely to dominate the state's long-term fiscal condition: (1) state revenues will grow moderately; (2) "receiver populations" (the elderly, school-age children, and others who depend on state aid) will grow at least as fast as revenues; and (3) corrections costs will skyrocket. These trends will result in a growing squeeze on public services and battle among constituencies for scarce funds. If current laws and policies do not change, the best estimates for 2005 place health and welfare spending at 32 percent, corrections at 20 percent, and K-14 education at 39 percent of the state budget. The 20 percent that was available for higher education and all other government functions will be cut by more than half. The state will be hard-pressed to increase per-pupil spending in K-12 education fast enough to keep pace with inflation and may very well fall behind the rest of the nation. If current trends persist to 2005, the University of California and the California State University systems will have to turn away more than 135,000 full-time-equivalent (FTE) students while the state's community colleges will turn away another 180,000 FTE, degree-credit students. California's long-term budget constraints may be limiting its future economic growth by limiting its investments in education. Forty-four tables and 24 figures are included. Appendices contain 13 additional tables, sensitivity to revenue and expense assumptions, and modeling K-12 expenditures. (Contains 16 references.) (LMI)

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