LAO: State’s reserves could weather mild recession, face “considerable uncertainty”

Although it faces “considerable uncertainty,” the state’s budget could survive a mild recession for four years without a tax hike or sharp cuts, according to a new report from the Legislative Analyst’s Office.

The LAO warned that the stock market fluctuations and other “volatile and unpredictable” economic factors make it difficult to project the state’s finances too far out. Regardless, the LAO estimates that the state would be fine through 2020-21. 

The projections would change with any new obligations, both at the state and federal levels.

Gov. Jerry Brown has been quick to veto new spending or tax cuts that aren’t paid for, like the ill-fated effort to remove sales tax on tampons and other feminine hygiene products, but the impending negotiations on transportation issues may call for new spending. The LAO also pointed to the possibility that a new president and Republican-controlled Congress may change federal policies that affect that state’s budget.

“Any such state or federal policy changes could have a significant impact on the state’s ‘bottom line,'” wrote the LAO.