In This Moment (11/19): Legislative Analyst’s Office Fiscal Outlook Report

This week, the Legislative Analyst’s Office (LAO) released a report on the fiscal outlook for schools and community colleges in 2020-21 and beyond. In the midst of the challenges related to COVID-19 that schools throughout California are facing, this report offers some good news.

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LAO Releases Positive Outlook for School Funding

The LAO released its Fiscal Outlook for Schools and Community Colleges painting a revenue picture for 2020-21 and future years. The news, at least for now, is much better than expected: this outlook dramatically improves projections for the Proposition 98 guarantee for 2020-21.

Compared to the June Budget Act, the LAO estimates that the 2020-21 Prop. 98 guarantee will be $13.1 billion higher than original estimates. The 2020-21 guarantee would be even higher than estimates prior to the COVID-19 pandemic, allowing the state to reverse all of the existing payment deferrals, a cost of $12.5 billion.

The improved outlook would immediately relieve fiscal pressure on school districts and reduce pressure from deferral repayment obligations on Prop. 98 funding in future years. Reversing the deferrals, which are currently set to begin in February 2021, will require the Legislature to take action in January 2021.

While the positive fiscal outlook is welcome news, we will continue to monitor the Legislature’s activity on the budget closely--and we will continue to provide updates as they are available.