The Future of Fiscal Reform

Fiscal policy is the set of decisions a government makes to both collect revenue (taxes) and pay for programs (spending). Both of these elements come together in the form of a budget—the collection of tables and calculations that represent the government’s resource allocation plan for the coming year. It is much more than an accounting exercise, and it is easy to ignore the role of fiscal policy as the realm of spreadsheet geeks and bean counters. The reality is that fiscal policy touches nearly everything the government does if you consider that there isn’t much you can do if you don’t have the resources.

Contemplating the future direction of California’s fiscal policy requires a firm understanding of the present. Toward that end, this report first outlines the facts that describe the contours of the state’s fiscal landscape. It then explores the major drivers – the economy, demographics, and policy – as well as landmark events that constitute the origins of the state’s current fiscal condition. Finally, it examines how past trends are expected to shape the future of state fiscal policy.