California’s Strong Revenue Trends Mask Looming Budget Risk

Jan 23, 2026 - Were the markets to drop considerably, budget problems would be tens of billions of dollars larger, necessitating even deeper cuts and/or tax increases. These challenges would not be short-lived either.
https://lao.ca.gov/Publications/Report/5104

The 2026-27 Budget: California's Fiscal Outlook

Nov 19, 2025 - However, our Fiscal Outlook revenue forecast, shown in Figure  2 , reflects a smaller, temporary upgrade which reverses beginning in 2026 ‑ 27 —resulting in 2026 ‑27 revenues being in line with budget act estimates.
https://lao.ca.gov/Publications/Report/5091

Building Reserves to Prepare for a Recession

Mar 7, 2018 - Second, the dot ‑com bust involved much more significant losses in the stock market, which affect capital gains revenues. General Fund Revenue Volatility Has Likely Increased Since Last Recession. Since the Great Recession ended, changes in the state ’s policies and economy have likely increased the volatility of General Fund revenue.
https://lao.ca.gov/Publications/Report/3769

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 2023-24 Budget: Multiyear Assessment

Feb 15, 2023 - Figure  1 displays the distribution of most likely revenue outcomes over the multiyear (in grey). As seen in the figure, the revenues required to balance the budget (in red) are considerably above the most likely scenario in all but 2026 ‑27.
https://lao.ca.gov/Publications/Report/4687

Whether or Not to Tap Reserves to Solve Estimated Budget Problem Emerges as Key Fiscal Decision Facing California’s Legislature

Apr 19, 2023 - At the same time, we have estimated that revenues are much more likely to be sufficient to cover the state ’s baseline commitments —which are expenditures stripped of the one-time and temporary allocations.
https://lao.ca.gov/Publications/Report/4762

Managing California’s Cash

Sep 3, 2019 - One key benefit of S B  84 , for example, is that it likely will have a substantial fiscal benefit to the state —the loan is likely to result in billions of dollars in savings to the state over time.
https://lao.ca.gov/Publications/Report/4092

The State Appropriations Limit

Apr 21, 2021 - This means funding for some existing state priorities, like more spending on housing, likely would qualify. As with other options, however, pursuing more spending on excluded purposes over the long term might need to be paired with other budgetary changes, such as reductions to existing services due to cost growth.
https://lao.ca.gov/Publications/Report/4416

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

Jan 12, 2026 - First, the budget includes about ten budget solutions —proposals that create budget capacity, improving the budget ’s bottom line —and they total around $9  billion. Second, the Governor ’s budget includes about 60 discretionary spending proposals —proposals that use budget capacity, eroding the budget ’s bottom line —and these total about $600  million.
https://lao.ca.gov/Publications/Report/5101

The 2025-26 Budget: Multiyear Budget Outlook

May 24, 2025 - Fundamentally, our assessment and that of the administration are very similar —the state is likely to face persistent future deficits. These deficits range from $10  billion to $20  billion through 2028-29.
https://lao.ca.gov/Publications/Report/5052