California’s Strong Revenue Trends Mask Looming Budget Risk

Jan 23, 2026 - After the dot-com bust and the Great Recession, it took four and five years, respectively, for revenues to recover. Incorporating revenue risk into the budget now, therefore, reflects prudence, not pessimism.
https://lao.ca.gov/Publications/Report/5104

New Inflation Poses Not So New Budget Risk

Dec 15, 2022 - Yet, while no one welcomes the idea of an economic downturn, California is much more fiscally prepared for one now than before other periods of budget stress, such as the Great Recession. This is the culmination of a multiyear initiative aimed at enhancing state budget resilience.
https://lao.ca.gov/Publications/Report/4653

Amid Good Fiscal Times, Planning for the Future Is Crucial

May 21, 2019 - The idea here is that in good times —when revenues are strong —the state spends somewhat below its capacity, sequestering the difference in reserves. Later, when the economy and tax receipts weaken, the state can draw upon its accumulated savings to fund a spending level above what revenues would otherwise support.
https://lao.ca.gov/Publications/Report/4051

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

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

May 17, 2024 - While executing this proposal would be technically complex, we think the underlying idea is meritorious. Next Steps for the Legislature. As the Legislature enters the final phase of budget deliberations, we suggest four key areas of consideration.
https://lao.ca.gov/Publications/Report/4902

An Extraordinary Moment in California's Fiscal History

Apr 11, 2019 - There are merits to both ideas, but we recommend the Legislature consider not limiting the financial support for the subsidies solely to the penalty revenues. In another example, the Governor proposes expanding the California Earned Income Tax Credit (CalEITC) program.
https://lao.ca.gov/Publications/Report/4003

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

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 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

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