California’s Strong Revenue Trends Mask Looming Budget Risk

Jan 23, 2026 - As we described in our November Fiscal Outlook , the recent stronger-than-expected revenue trends are almost entirely explained by the personal income tax (PIT), which has seen double digit growth this year.
https://lao.ca.gov/Publications/Report/5104

The 2026-27 Budget: Overview of the Governor's Budget

Jan 12, 2026 - This includes proposals to: (1)  remove the state ’s share of costs associated with growth in IHSS hours per case, which we estimate could save $650  million by 2029 ‑30 (if hours continue to grow at their current rates); (2)  make an ongoing reduction to the Middle Class Scholarship program, which generates $541  million in savings beginning in 2027 ‑28; and (3)  make $12  million in previously provided ongoing federal ‑related litigation funding limited term.
https://lao.ca.gov/Publications/Report/5101

The 2026-27 Budget: California's Fiscal Outlook

Nov 19, 2025 - However, our Fiscal Outlook revenue forecast, shown in Figure  2 , reflects a smaller, temporary upgrade which reverses beginning in 2026 ‑ 27 —resulting in 2026 ‑27 revenues being in line with budget act estimates.
https://lao.ca.gov/Publications/Report/5091

The 2025-26 Budget: Overview of the Spending Plan

Oct 16, 2025 - However, about $4  billion of the budget problem results from new, discretionary General Fund spending in the budget package, as well as some budget actions adopted in a special session, which we describe in the box below.
https://lao.ca.gov/Publications/Report/5079

The 2025-26 Budget: Initial Comments on the Governor's May Revision

May 17, 2025 - Revenues for prior and current years are up a total of $6  billion, primarily reflecting stronger ‑than ‑expect personal income tax collections which are running $4  billion ahead of prior projections as of April.
https://lao.ca.gov/Publications/Report/5044

The 2025-26 Budget: Multiyear Budget Outlook

May 24, 2025 - The Legislature likely will need to adopt additional solutions that increase ongoing revenues or reduce ongoing spending —both of which involve the most difficult and consequential trade-offs for policy makers.
https://lao.ca.gov/Publications/Report/5052

The 2025-26 Budget: Undertaking Fiscal Oversight

Feb 24, 2025 - Notably, this figure excludes special funds, which support a variety of other programs (some of which are of interest to the Legislature, like unemployment insurance and high-speed rail). We focus on General Fund here because it is the state ’s main operating account and faces significant fiscal pressure in coming years.
https://lao.ca.gov/Publications/Report/4983

Rethinking California's Reserve Policy

Apr 10, 2025 - This risk is larger for the capital gains approach—which relies on specific assumptions about inherently unpredictable capital gains—than our simpler alternative—which relies only on more general assumptions about revenue volatility broadly.
https://lao.ca.gov/Publications/Report/5028

The 2025-26 Budget: Overview of the Governor's Budget

Jan 13, 2025 - Some of the largest spending augmentations proposed include: (1) $60  million to provide additional grants under the Cal Competes program; (2)  the intent to partially restore an ongoing reduction to the trial courts, which, if enacted, would cost $42  million ongoing; and (3)  the Governor ’s proposed expansion to College Corps, which would cost $5  million in 2025 ‑26, but grow to $84  million  ongoing.
https://lao.ca.gov/Publications/Report/4951

The 2025-26 Budget: California's Fiscal Outlook

Nov 20, 2024 - This is entirely due to improving income tax collections, which would, under our forecast, end the current year 20  percent higher than two years ago. That being said, the ultimate outcome is highly uncertain.
https://lao.ca.gov/Publications/Report/4939