The Legislature will use the March revenue forecast to write the 2025–27 operating budget. As I wrote yesterday, the Legislature has $1.85 billion less to work with over the outlook period than it did when it enacted the current budget.

With the new forecast, I estimate that the maintenance level shortfall (the deficit between current resources and the cost of continuing current services, adjusted for inflation and enrollment) is about $4.9 billion in 2025–27 and a total of about $8.7 billion over four years.

Note that this estimate does not assume 4.5% annual revenue growth in 2027–29. It assumes the revenue forecast, in which revenues are expected to grow by 3.7% in 2028 and by 3.4% in 2029. The Legislature is allowed by statute to assume 4.5% annual revenue growth in the second biennium. I estimate that doing so would add about $995 million in resources, which would bring the four-year shortfall down to about $7.7 billion. However, as we showed in our report on the causes of the shortfall, relying on this phantom revenue was a contributing factor.

Although the revenue forecast is down since February, this is not a revenue shortfall. Revenues are forecasted to increase by $4.507 billion from 2023–25 to 2025–27 and by another $5.473 billion from 2025–27 to 2027–29. Indeed, even if revenues were still at their February 2024 level, we would be facing a maintenance level shortfall of about $3.6 billion in 2025–27 and $6.8 billion over four years.

Finally, I’ve written about why there is a wide range of estimates of the shortfall. The bottom line is that most estimates include various new policy spending. The true maintenance level shortfall, assuming no new policy (and given publicly available information), is about $8.7 billion.