California’s Strong Revenue Trends Mask Looming Budget Risk

Jan 23, 2026 - The added risk variable weighs on the range of revenue outcomes that we view as most plausible. The middle of the range, which becomes our main revenue forecast, is thus lower than if we did not include the stock market risk indicator.
https://lao.ca.gov/Publications/Report/5104

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

Feb 20, 2026 - Under the state’s constitutional budget formulas, a revenue increase of this magnitude would translate, very roughly, into a $2.5 billion improvement in the budget bottom line. Given the recent forecasting differences between our office and the administration, there is a good chance the administration’s revenue upgrade at May Revision will be larger than our current estimate.
https://lao.ca.gov/Publications/Report/5133

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

Jan 12, 2026 - Among these, some of the largest drivers of increased costs include Medi‑Cal, debt service on general obligation bonds, and employee compensation. This increases the administration’s estimate of the deficit relative to our forecast, partially offsetting some of the revenue improvement.
https://lao.ca.gov/Publications/Report/5101