The LAO Opines on Budget Trigger as Key Meeting Nears

Yesterday, the Legislative Analyst’s Office (LAO) issued its analysis of the federal economic recovery bill. The LAO estimates that California will receive a total of $31.5 billion in “state aid” – meaning additional federal funds for state programs – during the current and next two federal fiscal years. This estimate is lower than the CBP’s estimate, which exceeds $50 billion, for a couple of reasons. First, we tallied federal dollars that will flow to California’s residents and local governments as well as to the state government. This includes $1.8 billion to increase the number of families who qualify for the federal Child Tax Credit in 2009 and 2010, and $1.5 billion for increased nutritional benefits through the Supplemental Nutrition Assistance Program (formerly the Food Stamp Program). Second, we included funds that will benefit California and Californians both before and after the LAO’s cut-off date.

The LAO also waded into the budget trigger issue that we’ve blogged about. The LAO reached a conclusion that, at first glance, is similar to the Department of Finance’s position. However, the LAO also notes that the trigger language is “open to interpretation.” Specifically, the wording “raises such questions as whether $10 billion must actually be used to offset state General Fund costs, or whether this requirement would be satisfied if funds of this amount were identified that theoretically could be used in this way.”

We can only hope that Director of Finance Michael Genest and State Treasurer Bill Lockyer keep this point firmly in mind when they hold their public hearing on the trigger on Tuesday, March 17, at 10 a.m. in the state Capitol, Room 4203.

— Scott Graves