California’s Strong Revenue Trends Mask Looming Budget Risk

Jan 23, 2026 - To do this, we add a stock market indicator to our forecast models alongside other the economic variables. The added risk variable weighs on the range of revenue outcomes that we view as most plausible.
https://lao.ca.gov/Publications/Report/5104

The 2026-27 Budget: How to Use One-Time Revenue Improvements

Feb 20, 2026 - For example, we recommend the Legislature: Do Not Suspend the $3  Billion True Up Into the Budget Stabilization Account (BSA). The Governor ’s budget proposes suspending a roughly $3  billion true-up deposit that otherwise would be required in 2025-26.
https://lao.ca.gov/Publications/Report/5133

Rethinking California's Reserve Policy

Apr 10, 2025 - There are many options for doing this, but given the volatility in the state ’s revenues, we think it is important to set aside much more funds in years when revenues are surging , rather than setting aside somewhat more in every year.
https://lao.ca.gov/Publications/Report/5028

Despite Fiscal Forecasting Uncertainties, Multiyear Budget Planning Essential

May 27, 2021 - One reason is that—given the state’s balanced-budget requirement—doing so requires assuming that the multiyear budget projections are wrong. To appreciate why this is problematic, it is useful to revisit some of the reasons for doing multiyear fiscal forecasting in the first place.
https://lao.ca.gov/Publications/Report/4443

The Definition of Qualified Capital Outlay for the State Appropriations Limit

Feb 18, 2022 - However, we would not consider purchases of equipment or personal property that do not improve the underlying asset excludable. Such purchases include, for example, furniture and computers. Similarly, we would not consider operations costs (that do not improve an asset) as excludable.
https://lao.ca.gov/Publications/Report/4547

The 2022-23 Budget: State Appropriations Limit Implications

Mar 30, 2022 - Proposals That Do Not Meet a SAL Requirement. Any budget proposals that do not meet one of the three categories listed in the first paragraph do not help the state meet its SAL  requirements. This includes, for example, most spending on program benefits, such as for health and human services programs; required or voluntary contributions to the state ’s retirement systems; and deposits into the state ’s reserves.
https://lao.ca.gov/Publications/Report/4583

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

Jan 13, 2024 - When changes in costs do not occur automatically under current policy, we count them as budget solutions or augmentations. We take this approach in order to provide the Legislature visibility into the full scope of the administration ’s choices.
https://lao.ca.gov/Publications/Report/4825

The 2024-25 Budget: Initial Comments on the Governor’s May Revision

May 17, 2024 - While not all of these amounts represent lower state spending over the long term, they do result in savings today at a cost of forgone savings in the future. As a result, we count them as spending-related solutions.
https://lao.ca.gov/Publications/Report/4902

New Inflation Poses Not So New Budget Risk

Dec 15, 2022 - While some spending areas, such as the Local Control Funding Formula and Medi-Cal managed care rates, include formulaic adjustments that automatically take inflation into account, others do not. For the many state programs that do not adjust automatically, appropriations are fixed at their existing level.
https://lao.ca.gov/Publications/Report/4653

California's Legislative Analyst's Office and the Value of Independence

Nov 15, 2024 - Although aligning revenue estimates might reduce the potential for confusion, doing so would risk creating bigger problems. In particular, it could provide a false sense of certainty about the state ’s fiscal position.
https://lao.ca.gov/Publications/Report/4938