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Fiscal Update
May 7, 2020
The COVID-19 Pandemic and California’s Budget Outlook
The COVID-19 pandemic has caused enormous hardship for families, businesses
and governments across the world, the United States, and California. It has
endangered health, stressed the health care system, and caused devastating
losses in family and business income.
COVID-19 has caused a national recession, a precipitous decline in income,
rapidly rising health and human services caseloads and substantial COVID-19
driven costs. This update reflects the Department of Finance’s May Revision
forecast, and underscores the necessity of further federal stimulus to help states
and local governments support an effective response to COVID-19, a timely and
fact-based modification of the stay-at-home order, and a safe, expedited
economic recovery.
California’s Pre-Pandemic Budget and Economy
California began 2020 with a strong bill of financial health—a strong economy,
historic reserves, and a structurally balanced budget.
The unemployment rate (3.9 percent) was one-third of its Great Recession
peak (12.3 percent).
The “Wall of Debt” (past budgetary borrowing) was eliminated, and
supplemental payments were made to retirement obligations.
The 2020-21 Governor’s budget reflected a $5.6 billion surplus.
The budget reflected a record level of reserves: $21 billion in FY 2020-21,
including $18 billion projected in the state’s Rainy Day Fund.
Revenues through March ran $1.35 billion above January’s projections, as
markets outperformed the budget forecast.
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