California’s Strong Revenue Trends Mask Looming Budget Risk

Jan 23, 2026 - Whereas California’s labor market has stagnated over the last two years, the S&P 500 stock index has appreciated roughly 50 percent over the same period. And most of this increase has come from skyrocketing share prices among a handful of firms associated with innovations in Artificial Intelligence (AI).
https://lao.ca.gov/Publications/Report/5104

Building Reserves to Prepare for a Recession

Mar 7, 2018 - Budget Stabilization Account Proposition   58 Governed BSA From 2004 t o 2014. Until 2014, the BSA was governed by Proposition  58. Passed by voters in 2004, Proposition   58 r equired the state to make an annual transfer into the BSA.
https://lao.ca.gov/Publications/Report/3769

Evolution of the Balance of the Budget Stabilization Account

Nov 14, 2018 - As Figure  1 shows, this means that $500  million of the initial $2  billion deposit is “constitutionally required ” (under the true-up provisions) and the remainder is optional. Under our recent Fiscal Outlook revenue estimates for 2017 ‑18 and 2018 ‑19, the initial $2.6  billion optional deposit made in 2018 ‑19 would now be mostly constitutionally required, with only $320  million still considered optional.
https://lao.ca.gov/Publications/Report/3900

The 2024-25 Budget: Overview of the Governor's Budget

Jan 13, 2024 - We Estimate the Administration Solved a Larger Budget Problem —$58   Billion. While the Governor cited a budget problem of $38  billion, we estimate the administration solved a budget problem of $58  billion.
https://lao.ca.gov/Publications/Report/4825

The 2026-27 Budget: California's Fiscal Outlook

Nov 19, 2025 - The stock market (S &P 500) has risen 50  percent in the last two years. Most of these gains come from the meteoric rise in the value of a handful of tech companies that investors believe will be major beneficiaries of recent advances in AI.
https://lao.ca.gov/Publications/Report/5091

The 2018-19 May Revision: LAO Economic Outlook

May 12, 2018 - As of early May, the PE ratio of the Standard and Poor ’s 500 index was 24.5. The typical PE ratio since 1990 is 21 (19 if the dot-com bubble of the late 1990s and early 2000s is excluded). Similar to the price-to-earnings ratio, the home price-to-rent ratio is used to gauge if home prices are in line with underlying demand for housing.
https://lao.ca.gov/Publications/Report/3829

The 2024-25 Budget: Deficit Update

Feb 20, 2024 - The 2024-25 Budget: Deficit Update Deficit Update Under LAO Revenue Update, Budget Problem Grows by $15  Billion The state already faces a significant deficit this year — we estimate it totaled $58 billion under the administration’s revenue forecast at the time the Governor’s budget was proposed in January.
https://lao.ca.gov/Publications/Report/4850

Whether or Not to Tap Reserves to Solve Estimated Budget Problem Emerges as Key Fiscal Decision Facing California’s Legislature

Apr 19, 2023 - Other downturns, such as the 2001 so-called dot-com recession, had severe fiscal implications while inflicting somewhat milder economic damage. The 2008 Great Recession had brutal effects on both the state ’s economy and budget.
https://lao.ca.gov/Publications/Report/4762

Managing California’s Cash

Sep 3, 2019 - After a period of relative calm in the mid ‑ and late ‑1990s, California faced another series of years with acute budget problems following the dot ‑com bust and ensuing recession. Although the dot ‑com bust was relatively mild in economic terms, it hit the California budget —which is particularly reliant on the Bay Area ’s technology sector —especially hard.
https://lao.ca.gov/Publications/Report/4092

Rethinking California's Reserve Policy

Apr 10, 2025 - In March of 2004, on the heels of the dot ‑com bust, voters passed Proposition  58, which created the Budget Stabilization Account (BSA). In the 2006 ‑07 budget, the Legislature deposited $472  million into the BSA and in 2007 ‑08 deposited $1.5  billion.
https://lao.ca.gov/Publications/Report/5028