LAO

By Chris Megerian
April 14, 2015

California’s drought has threatened farmers, ski resorts and golf courses, but it’s unlikely to do much damage to the state’s overall economy or budget, according to a new report.

“We currently do not expect the drought to have a significant effect,” said the report, released Tuesday by the nonpartisan Legislative Analyst’s Office, which provides budget advice to state lawmakers.

The minor impact is explained by the lopsided relationship between water use for farming and agriculture’s overall contribution to the state economy.

Farmers consume four times as much water as California’s cities and towns, and they produce a huge portion of the country’s crops.

But they contribute only 2% to the state’s gross domestic product, according to the seven-paragraph report.

Moreover, just 3% or 4% of Californians work in agriculture.

“Even a substantial decline in agriculture’s share of the economy, such as … during and after the 1976-77 drought, probably would have only a limited impact on the overall state economy,” the report said.

In fact, the report said, the state’s economic output actually increased during that time.

This year, tax collections are unlikely to suffer from the drought, and so far they’ve outpaced expectations. Revenue was $1.3 billion ahead of projections at the end of March, according to the analysts.

California’s economy has been on the upswing in recent years, driven in part by a surging technology sector in Silicon Valley.

The influx of revenue has helped state leaders begin to build a rainy-day fund, pay off debt and chip away at hundreds of billions of dollars in long-term costs such as pension obligations.

“We adapt,” said Steve Levy, director of the Center for Continuing Study of the California Economy in Palo Alto. “This is an attractive place to be.”

None of that means the drought isn’t having a big effect on the state. Farmers have taken a $1.5-billion hit, fallowing 400,000 acres and laying off 17,000 people, according to state officials.

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