Moreover, much of the revenue gains have been in historically more stable revenue streams, such as sales tax and income tax withholding. Can these trends really remain so far above the long‑run trend for an extended period of time? Historically, strong economic and revenue growth more often than not is followed by more growth. Underlying this growth is a meteoric rise in several measures of economic activity. Will Recent Revenue Gains Be Sustained? Revenue collections have grown rapidly in recent months, coming in over $10 billion ahead of budget act expectations so far this year. Specifically, we find the operating surpluses range from $3 billion to $8 billion over the multiyear period. This report finds the budget has such capacity. Is There Capacity for New, Ongoing Commitments? We also examine the budget’s condition through 2025‑26 and assess its capacity for new commitments, such as spending increases or tax reductions. (To meet those requirements, the Legislature could reduce taxes spend more on excluded purposes, like infrastructure or issue tax rebates and make additional payments to schools and community colleges.) In addition-while there is significant uncertainty in these figures-we estimate the state could have $12 billion in additional SAL requirements in 2022‑23. Specifically, using our estimates of revenues and spending under current law and policy, the state would need to allocate roughly $14 billion to meet the constitutional requirements under SAL across 2020‑‑22. Given trends in revenues and spending, we see the SAL as the key issue this year. How Does the State Appropriations Limit (SAL) Affect Budget Choices? Our office historically has focused on budget balance and reserves as key budget structure issues. What Is the Anticipated Surplus? Despite the ongoing global pandemic and its disparate health and economic impacts on Californians, revenues are growing at historic rates and we estimate the state will have a $31 billion surplus (resources in excess of current law commitments) to allocate in 2022‑23.
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