In the May Revision, the administration forecasts that weaker tax collections in the coming months will erode the vast majority of the $4.5 billion of unexpected tax revenues collected since January. We do not agree with the administration's view of the state's revenue situation. As a result, our forecast now is $3.2 billion higher than the administration's May Revision total for 2011-12, 2012-13, and 2013-14 combined. While the state's fiscal condition has improved, there are many good reasons for the Legislature to adopt a cautious budgetary posture. After years of "boom and bust" budgeting, California's leaders now have the opportunity to build a budget for future years that gives the state more choices about how to build reserves in times of healthy revenue growth, prioritize future state spending, and pay off past debts. Given the improved fiscal forecast, we believe this is an ideal time for the Legislature to begin addressing its huge budgetary and retirement liabilities. In addition, given various risks to the economic outlook and the state's budgetary volatility, building larger state budget reserves in the coming years is an important priority, as doing so means there will be less necessity during future downturns to cut public spending, as occurred in recent years.