On November 20, 2024, the Legislative Analyst’s Office (LAO) released the annual fiscal outlook for California’s 2025-26 Budget. Legislators took action during the 2024-25 budget process to address an anticipated deficit in the 2025-2026 budget year. While the broader economy has been sluggish, high-income Californians have seen significant income growth, driven significantly by stock market gains. This increase has led to unanticipated income tax revenues; however, the reliance on stock market performance makes the sustainability of this revenue growth uncertain at best. This higher-than-anticipated revenue growth has resulted in a roughly balanced budget for 2025-2026, in the view of the LAO, with a smaller projected deficit of $2 billion. Despite the revenue growth, increased costs and spending still present significant challenges for California’s rural counties. RCRC counties, which often rely on agriculture, tourism, and natural resources may not benefit equally from the income growth seen in their high-income urban counterparts.
While the 2025-2026 budget outlook is considered to be relatively balanced compared to 2024-25, the LAO anticipates very little room for expanding existing programs or funding of new initiatives or programs. Additionally, significant pressures on rural counties in healthcare and social services, areas in which costs continue to rise, could further exacerbate economic disparities in the long-term. RCRC will continue to advocate strongly for the long-term and short-term fiscal needs of our member counties as the 2025-2026 budget process unfolds. The LAO’s Fiscal Outlook for 2025-2026 is available here.
For additional information, contact RCRC Senior Policy Advocate, John Kennedy.