Explaining Southern California's economy

For California, a budget surplus won't translate into a reserve

Schwarzenegger Holds Press Conference On Passing Of California Budget

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A view of the California State Capitol. The budget outlook is improving for the Golden State, but that doesn't mean there will soon be a lot of money on the bank.

California may declare a surplus for its fiscal year 2014 budget. Unfortunately, the state won’t be able to put money in the bank for a rainy day.

That doesn't mean its outlook isn't looking up. The credit rating agency Moody’s likes what it sees in the Golden State's improved fiscal situation. In particular, the passage of Prop 30 last November — raising incomes taxes on wealthy Californians and sales taxes on everybody — bodes well for future revenues.

But getting the budget out of deficit and into surplus doesn’t mean the state will be prepared for the next inevitable economic bust. 

Moody’s analyst Emily Raimes blames a history of underfunding education.

“As revenues increase in the state in the next few years, additional revenues will have to be dedicated to bringing that education funding back to the baseline where it would have been if the state had not been doing that underfunding," she said.

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