Sacramento --

California is growing older and more diverse.

The Latino population is projected to surpass that of whites in California in March to become the single largest "race or ethnic group," according to a report on shifting demographics in Gov. Jerry Brown's 2014-15 budget proposal. Also, the number of residents 65 and older will jump by 20.7 percent over the next five years, the report said.

State demographers expected Latinos to surpass the non-Hispanic white population seven months earlier, but Latino birth rates were lower than anticipated. Now, officials say, by March Latinos will make up 39 percent of California's population, edging out non-Hispanic whites at 38.8 percent. Nearly 25 years ago, non-Hispanic whites made up 57 percent of the state, while Latinos made up 26 percent.

The state's Department of Finance includes the projections in the governor's budget proposal because of the potential economic impact, such as the increase in retirees affecting the scope of services needed for an aging population, or income disparities among minority groups increasing the need for social or educational programs.

Reshaping the electorate

"Demographic changes that are coming will reshape the electorate, and in turn that will likely have impacts on policies and issues that decision makers focus on in the coming decades," said Mindy Romero, director of the California Civic Engagement Project at the UC Davis Center for Regional Change.

Geographic data for the state's 58 counties show the Bay Area is leading the state in economic and population growth, said Bill Schooling, chief demographer for the state Department of Finance. Statewide, coastal cities are growing faster than the Central Valley.

As a state, California experienced modest growth in the past fiscal year, with estimates pegging the population at 38.2 million residents. By July, demographers anticipate the state's population will grow by 300,000 people.

More old, fewer young

Growth rates vary drastically between age groups, with retiring Baby Boomers projected to reshape the labor force in the next 15 years as more than 1,000 Californians will turn 65 years old each day. At the same time, lower birth rates have resulted in fewer young people, with the 18-to-24-year-old group experiencing a 4.5 percent decline and 5- to 17-year-olds increasing just 0.2 percent.

"A big question mark is about what that means for policy for youth," Romero said. "Older voters often aren't as supportive of youth-specific policies."

Schooling said the median age for Latinos - 28 - shows many are in their childbearing years, which will drive future growth among the group.

"Considerably more births are Latino, even though the birth rate is not particularly high," he said.

Schooling said new data suggest the current trend won't continue to the point of Latino groups becoming a majority. State demographers previously projected the Latino population to reach more than 50 percent in 2042.

"In our projections, they get higher and higher, but not reaching a majority," Schooling said.

Asian groups, which currently make up 13 percent of the state, are also projected to see strong growth, mostly through immigration.

"It's less about one group being a couple tenths more of the population than another group, but more about a continuing trend for California being a majority-minority state," said Bruce Mirken, spokesman for the Greenlining Institute, a Berkeley nonprofit that advocates for communities of color. "Everything that government does, that private industry does, needs to react to that reality."

Melody Gutierrez is a San Francisco Chronicle staff writer. E-mail: mgutierrez@sfchronicle.com Twitter: @MelodyGutierrez