California’s Strong Revenue Trends Mask Looming Budget Risk

Jan 23, 2026 - Throughout the mid-to-late 1990s, the stock market boomed over optimism around the Internet and dot-com start-ups. Strong tax revenue trends from this boom generated large budget surpluses that ultimately gave way to serious deficits once the bubble burst and PIT revenues declined nearly 30  percent.
https://lao.ca.gov/Publications/Report/5104

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

Jan 12, 2026 - This includes proposals to: (1)  remove the state ’s share of costs associated with growth in IHSS hours per case, which we estimate could save $650  million by 2029 ‑30 (if hours continue to grow at their current rates); (2)  make an ongoing reduction to the Middle Class Scholarship program, which generates $541  million in savings beginning in 2027 ‑28; and (3)  make $12  million in previously provided ongoing federal ‑related litigation funding limited term.
https://lao.ca.gov/Publications/Report/5101

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

Feb 20, 2026 - In addition, recent budgets have relied on nearly $30  billion in borrowing to address deficits, and the Governor ’s budget proposes almost $6  billion in additional borrowing (see Figure  1). A period of strong revenue growth is not an appropriate time to draw down significant reserves or continue to rely on borrowing.
https://lao.ca.gov/Publications/Report/5133