California’s Strong Revenue Trends Mask Looming Budget Risk

Jan 23, 2026 - Moreover, investors have been aggressive in taking on high levels of margin debt (borrowing to buy stocks), which has reached approximately three times the historical norm. These and other indicators are at levels previously only seen at times when the market was approaching a peak before entering a period of retrenchment.
https://lao.ca.gov/Publications/Report/5104

Building Reserves to Prepare for a Recession

Mar 7, 2018 - By most measures, the recession of the early 1990s was more severe than the dot ‑com bust in the early 2000s. For example, unemployment in California reached 9. 7  p ercent in mid ‑ to late ‑1992, but peaked at 6. 9  p ercent after the dot ‑com bust.
https://lao.ca.gov/Publications/Report/3769

The 2026-27 Budget: California's Fiscal Outlook

Nov 19, 2025 - In the past, these patterns have been a sign that a stock market downturn will occur in the next couple of years. There certainly is some chance that this time is different and such a downturn is not forthcoming.
https://lao.ca.gov/Publications/Report/5091

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

The 2023-24 Budget: Multiyear Assessment

Feb 15, 2023 - Specifically, we assess how often in the past revenues experienced a positive deviation large enough to meet or exceed the proposed level of spending (adjusted for constitutional, formula ‑driven spending).
https://lao.ca.gov/Publications/Report/4687

Managing California’s Cash

Sep 3, 2019 - A Framework to Evaluate Future Cash Loans The Legislature has authorized two loans from the state ’s cash resources in the past few years. While we are not aware of any plans for a future loan, given the high level of internal borrowable resources, a future proposal is possible.
https://lao.ca.gov/Publications/Report/4092

The 2019-20 Budget: California Spending Plan—Debt Liabilities

Oct 17, 2019 - Proposition  98 sets a minimum funding level for schools and community colleges. The minimum required funding level is based on a series of formulas that depend on numerous factors. Most of the underlying factors are updated after adoption of the budget, and, in most cases, those changes result in changes to the minimum required funding level.
https://lao.ca.gov/Publications/Report/4106

Rethinking California's Reserve Policy

Apr 10, 2025 - Figure  7 shows states ’ rainy day funds as a share of total spending in 2024. On this measure, California ’s reserves rank 29 out of 50. (In fact, Figure  7 likely overstates California ’s reserve balances compared to other states because the data appears to include the SFEU in the state ’s rainy day fund balances, although it is not a true rainy day fund.)
https://lao.ca.gov/Publications/Report/5028

The 2018-19 May Revision: LAO Economic Outlook

May 12, 2018 - 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 2020-21 Budget: Overview of the California Spending Plan (Final Version)

Oct 5, 2020 - In past recessions, the state made loans from other state accounts, known as special funds, to the General Fund to address budget problems. The General Fund must eventually repay these loans with interest.
https://lao.ca.gov/Publications/Report/4263