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Monday, July 14, 2014

Update: The California Budget Surplus

by Calculated Risk on 7/14/2014 09:25:00 AM

In November 2012, I was interviewed by Joe Weisenthal at Business Insider. One of my comments during our discussion on state and local governments was:

I wouldn’t be surprised if we see all of a sudden a report come out, “Hey, we’ve got a balanced budget in California.”
At the time that was way out of the consensus view. And a couple of months later California announced a balanced budget, see The California Budget Surplus

The situation has improved since then. Here is the most recent update from California State Controller John Chiang: Controller Releases June Cash Update
State Controller John Chiang today released his monthly cash report for the month of June, and announced that the state's General Fund -- the primary account from which California funds its day-to-day operations and programs -- ended the fiscal year with a positive cash balance for the first time since June 30, 2007. A positive cash balance means that the state had funds available to meet all of its payment obligations without needing to borrow from Wall Street or the $23.8 billion available in its more than 700 internal special funds and accounts.
According to the monthly report covering California's cash balance, receipts and disbursements in June 2014, the General Fund had $1.9 billion in cash on June 30, marking the first time it has ended the fiscal year in the black since 2007, when it ended the year with $2.5 billion in the bank.

For the 2013-14 fiscal year, revenues came in at $101.6 billion, or $2.1 billion (2.1 percent) more than projected in the Governor’s budget released in January.
This is just one state, but I've been expecting local and state governments (in the aggregate) to add to both GDP and employment in 2014.

State and Local GovernmentThis graph shows total state and government payroll employment since January 2007. State and local governments lost jobs for four straight years.

Note: Scale doesn't start at zero to better show the change.

In June 2014, state and local governments added 24,000 jobs.  State and local government employment is now up 138,000 from the bottom, but still 606,000 below the peak.

It is pretty clear that state and local employment is now increasing. 

Note: Federal government layoffs have slowed (actually added 2,000 in June), but Federal employment is still down 23,000 for the year.