California’s Strong Revenue Trends Mask Looming Budget Risk

Jan 23, 2026 - Second, the Governor proposed suspending a $2.8  billion true-up deposit to the state ’s reserve that otherwise would be required. This proposal helps balance the budget but runs counter to the basic fiscal logic that stronger-than-expected revenues should be used to build reserves.
https://lao.ca.gov/Publications/Report/5104

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

Jan 12, 2026 - In our November Fiscal Outlook report, we estimated that the state faced an $18  billion budget problem. This budget problem was larger than the one anticipated by the administration in June, despite strong trends in income tax collections in the intervening months.
https://lao.ca.gov/Publications/Report/5101

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

Feb 20, 2026 - The Governor ’s budget proposes suspending a roughly $3  billion true-up deposit that otherwise would be required in 2025-26. We recommend the Legislature not suspend this deposit. Make a Smaller Withdrawal From the BSA.
https://lao.ca.gov/Publications/Report/5133