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 - For California, the dot ‑com era —when stocks rose and then fell precipitously in response to widespread adoption of the internet —offers the most salient example. The internet has proven to be a transformative technology and, yet, the stock market ’s initial reaction was clearly overly exuberant.
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 - Although state revenues are moderating from a historic peak, they are not yet consistent with recessionary levels. Using reserves now to maintain the recent spending peak would mean the state would have less reserves available to pay for its core services if revenues declined further or in the event of a recession.
https://lao.ca.gov/Publications/Report/4687

Rethinking California's Reserve Policy

Apr 10, 2025 - Put another way, if current law remained in place for the next 50  years, and without further saving above this level, cuts to core services and/or tax increases would often be necessary. Governor ’s Proposal Improves Upon Current Law, but Further Improvements Are Warranted.
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 2026-27 Budget: How to Use One-Time Revenue Improvements

Feb 20, 2026 - Further, the state faces significant structural deficits in the future. Accordingly, any windfall received from this revenue uptick represents an opportunity for the Legislature to prepare for future fiscal challenges.
https://lao.ca.gov/Publications/Report/5133

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

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