Link:https://mailchi.mp/5ac903164813/stress-testing-in-sacramento-6602594
Graphic:
Excerpt:
In January the Department Of Finance will issue the Governor’s Budget for 2022-23. No section will be more important than the Stress Test, which forecasts revenue losses in the event of a stock market decline such as in 2001-3 and 2008-9.
Last January, the Governor’s Budget forecast revenue losses of $100 billion. Just two years earlier, the 2019-20 Governor’s Budget forecast losses of $50 billion. That makes sense because, as DOF explains, “the higher levels and valuations in the stock market increase the risk of a large stock market drop leading to a large decline in capital gains revenues” on which California is extraordinarily dependent.
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Schools and other services need predictable annual funding. You should build reserves to the levels predicted by stress tests.
Author(s): David Crane
Publication Date: 5 Dec 2021
Publication Site: Govern for California (Mail Chimp)