California's Legislative Analyst Predicts $31 Billion Budget Surplus

SACRAMENTO (AP/CBS13) -- California will have a $31 billion budget surplus next year as revenues continue to climb despite the pandemic, according to a new forecast from the state's independent Legislative Analyst's Office.

The predicted surplus is so large the office estimates California will surge past a constitutional limit on state spending by more than $14 billion. That could require Gov. Gavin Newsom and state lawmakers to either cut taxes, spend more money on schools and infrastructure or - perhaps the more popular choice in an election year - give rebates to taxpayers.

California's tax collections have continued to soar despite the pandemic. From April to June of this year, California businesses reported a record high $216.8 billion in taxable sales - a 38.8% increase over 2020 and a 17.4% increase over pre-pandemic 2019. This comes as some economists worry about rising prices because of inflation.

This would be the fourth year in a row of increasing revenue. But the LAO said it's "impossible" to know whether California's revenue gains are sustainable.

"Recognizing this, our main revenue forecast takes a middle ground of possibilities, assuming neither that the gains are entirely sustainable nor that they are entirely unsustainable," the LAO wrote in its annual Fiscal Outlook.

Copyright 2021 CBS Broadcasting Inc. All Rights Reserved. The Associated Press contributed to this report.