California’s Strong Revenue Trends Mask Looming Budget Risk

Jan 23, 2026 - Rather than broad-based economic growth, PIT strength has been fueled by a very bullish stock market. Whereas California’s labor market has stagnated over the last two years, the S&P 500 stock index has appreciated roughly 50 percent over the same period.
https://lao.ca.gov/Publications/Report/5104

The 2026-27 Budget: California's Fiscal Outlook

Nov 19, 2025 - As shown in Figure  1 , many signs of an overly exuberant stock market are present today: measures of whether stocks are “expensive ” are at historically high levels, investors are borrowing more to buy stocks, and households are more invested in the stock market than they have been in at least 70  years.
https://lao.ca.gov/Publications/Report/5091

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

Jan 12, 2026 - Stock Market Poses Serious Risk to Revenues. Several historically reliable signs suggest the stock market is overheated and at high risk of reversing course into a downturn in the next year or so. Should a stock market downturn occur, income tax revenues would fall considerably.
https://lao.ca.gov/Publications/Report/5101

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

Feb 20, 2026 - The 2026-27 Budget: How to Use One-Time Revenue Improvements The 2026-27 Budget How to Use One-Time Revenue Improvements Recent stock market performance continues to boost income tax collections. In our Fiscal Outlook , we strongly advised the Legislature to treat near-term strength in tax collections as temporary because we expect these gains to reverse.
https://lao.ca.gov/Publications/Report/5133

The 2025-26 Budget: California's Fiscal Outlook

Nov 20, 2024 - Current stock prices relative to companies ’ past earnings (a common measure of how “expensive ” stocks are) are at levels rivaled only by the transitory booms of 1999 and 2021. Furthermore, a single company (Nvidia) accounts for about one ‑third of the total gains in the S &P 500 stock index over the last year.
https://lao.ca.gov/Publications/Report/4939

California’s Strong Revenue Trends Mask Looming Budget Risk [Publication Details]

Jan 23, 2026 - In this installment of Fiscal Perspectives, the Legislative Analyst describes how the LAO’s revenue estimates represent a hedge against downside stock market risk and why—despite current cash trends—caution matters given the state’s large, ongoing structural deficit.
https://lao.ca.gov/Publications/Detail/5104

The 2026-27 Budget: How to Use One-Time Revenue Improvements [Publication Details]

Feb 20, 2026 - Recent stock market performance continues to boost income tax collections. In our Fiscal Outlook, we strongly advised the Legislature to treat near-term strength in tax collections as temporary because we expect these gains to reverse. Further, the state faces significant structural deficits in the future.
https://lao.ca.gov/Publications/Detail/5133

The 2019-20 May Revision: LAO Economic Outlook

May 12, 2019 - Stock Markets. After dipping significantly at the end of 2018, stock prices now have nearly rebounded to the historically high levels seen in the fall of 2018. Some signs suggest that stocks, at current prices, are somewhat overvalued.
https://lao.ca.gov/Publications/Report/4036

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

Jan 13, 2025 - Instead, the gains appear largely tied to the booming stock market, a situation which can change rapidly and without warning. The  administration appears to share some of these concerns, noting recent job losses among high ‑wage workers and the risks posed by the inherent volatility of tax receipts tied to stock market gains.
https://lao.ca.gov/Publications/Report/4951

COVID-19 and California’s Evolving Fiscal Outlook

Mar 18, 2020 - This estimate assumed that the average price level for the S &P  500 stock index would remain relatively flat from late 2019 through the first half of 2020, with gradual price appreciation thereafter.
https://lao.ca.gov/Publications/Report/4203