California’s Strong Revenue Trends Mask Looming Budget Risk

Jan 23, 2026 - 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. And most of this increase has come from skyrocketing share prices among a handful of firms associated with innovations in Artificial Intelligence (AI).
https://lao.ca.gov/Publications/Report/5104

The 2026-27 Budget: Contract to Achieve Operational Efficiencies [Publication Details]

Mar 10, 2026 - The budget assumed that the process changes resulting from the contract would reduce state costs by $500 million in 2025-26, growing to $2 billion in annual savings by 2028-29. This post provides background on the state’s recent efforts to identify efficiencies to achieve budget savings and our office’s comments and recommendations concerning the progress of the administration’s efforts to reduce state costs through this contract.
https://lao.ca.gov/Publications/Detail/5156

How Have Past Stock Market Downturns Affected Income Tax Revenue? [EconTax Blog]

Mar 9, 2026 - By most measures, the global financial crisis was more severe than the dot-com crash. The state 's unemployment rate, for example, peaked at 7 percent following the dot-com crash but reached nearly double that during the financial crisis and remained elevated for much longer.
https://lao.ca.gov/LAOEconTax/Article/Detail/852

How Have Past Stock Market Downturns Affected Income Tax Revenue? [EconTax Blog]

Mar 9, 2026 - By most measures, the global financial crisis was more severe than the dot-com crash. The state 's unemployment rate, for example, peaked at 7 percent following the dot-com crash but reached nearly double that during the financial crisis and remained elevated for much longer.
https://lao.ca.gov/LAOEconTax/article/Detail/852

The 2026-27 Budget: Contract to Achieve Operational Efficiencies

Mar 10, 2026 - In June 2025, the administration estimated that this endeavor would result in annual General Fund savings of $500  million in 2025-26, growing to roughly $2  billion General Fund annually by 2028-29.
https://lao.ca.gov/Publications/Report/5156

The 2026-27 Budget: Cap-and-Invest Expenditure Plan

Feb 10, 2026 - Proposes $500  million to support the remainder of the planned $1.25  billion CalFire backfill. ZEV Incentive Program. Proposes $115  million to create a new light ‑duty ZEV incentive program . (The Governor also proposes providing $85 million from the Air Pollution Control Fund—similarly freed up from undoing the previously‑approved MVA fund transfer—to support this new ZEV program, for a total of $200 million.)
https://lao.ca.gov/Publications/Report/5114

The 2026-27 Budget: Child Welfare

Mar 3, 2026 - The administration estimates that implementing the Tiered Rate Structure will cost more than $300  million General Fund in 2027-28, $500  million in 2028-29, and $700  million General Fund in 2029-30 (with some potential growth thereafter and ongoing).
https://lao.ca.gov/publications/report/5147

Oversight of certain public benefit artificial intelligence (AI) companies. [Ballot]

Jan 20, 2026 - The measure would have the following major fiscal effects: Increased state costs that would likely be in the tens of millions of dollars annually to establish and operate a new regulatory commission overseeing certain public benefit AI com panies.
https://lao.ca.gov/BallotAnalysis/Initiative/2025-033

The 2026-27 Budget: Proposition 98 Guarantee and K-12 Spending Plan

Feb 4, 2026 - The S &P 500, for example, has risen about 40  percent over the last two years. Several signs, however, suggest that the stock market has become overvalued. For example, the ratio of stock prices to corporate earnings (a measure of how expensive stocks are) is near historically high levels ( Figure  5 ).
https://lao.ca.gov/Publications/Report/5110

The 2026-27 Budget: Framework for Approaching the Natural Resources, Environmental Protection, and Agriculture Budget

Feb 10, 2026 - The  proposed funding would support the cleanup of approximately 1,000 properties (about 500 per year), though DTSC estimates that about 2,100 properties still would require remediation thereafter. Given  the ongoing public health risks posed by lead ‑contaminated soil to residents in the surrounding communities, the state has a strong interest in advancing cleanup efforts.
https://lao.ca.gov/Publications/Report/5116