The 2026-27 Budget: California's Fiscal Outlook

Nov 19, 2025 - As shown in Figure  1 , many signs of an overly exuberant stock market are present today: measures of whether stocks are “expensive ” are at historically high levels, investors are borrowing more to buy stocks, and households are more invested in the stock market than they have been in at least 70  years.
https://lao.ca.gov/Publications/Report/5091

California’s Strong Revenue Trends Mask Looming Budget Risk

Jan 23, 2026 - These firms have invested heavily in building out data centers and on extraordinary pay packages for their key employees. This spending, along with gains to investors, has turbo-charged state income tax receipts.
https://lao.ca.gov/Publications/Report/5104

A Framework for Allocating Federal Recovery Funds

May 4, 2021 - Define Goals and Invest in Planning Identify Significant Challenges. The federal assistance provided under the ARP is unprecedented. The magnitude of the federal package represents a unique opportunity for the state to take significant steps towards addressing various longstanding challenges that the pandemic has served to magnify.
https://lao.ca.gov/Publications/Report/4422

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

Feb 20, 2026 - 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 2022-23 Budget: Fiscal Outlook for Schools and Community Colleges

Nov 17, 2021 - Although CalSTRS recently reported investment returns far above its long ‑term target, these returns are unlikely to reduce required district contributions. Under the funding plan the Legislature adopted in 2013 ‑14, the state General Fund is responsible for most of the volatility in CalSTRS ’ investment returns.
https://lao.ca.gov/Publications/Report/4473

Rethinking California's Reserve Policy

Apr 10, 2025 - Due to complex interactions, those formulas inconsistently reduce the excess capital gains directed to Proposition  2. As shown in Figure  13 , since Proposition  2 was passed, excess capital gains to Proposition  2 have been reduced between 0  percent to 30  percent each year (larger increments are also possible, if not likely, in the future).
https://lao.ca.gov/Publications/Report/5028

New Inflation Poses Not So New Budget Risk

Dec 15, 2022 - Higher interest rates disincentivize consumers from borrowing and —by raising the cost of capital —dissuades firms from borrowing to make new investments. Relatedly, higher interest rates also increase the return on safer investments, such as treasury bonds and savings deposits.
https://lao.ca.gov/Publications/Report/4653

Strong Tax Collections Belie California's Challenging Fiscal Outlook

Apr 26, 2022 - In normal economic times, there is a positive spread between the yields on ten-year and two-year notes. When this gap shrinks or inverts, however, it suggests bond investors anticipate that in the future, the Fed will be holding interest rates low due to a weaker economy.
https://lao.ca.gov/Publications/Report/4590

The 2026-27 Budget: How to Use One-Time Revenue Improvements [Publication Details]

Feb 20, 2026 - Recent stock market performance continues to boost income tax collections. In our Fiscal Outlook, we strongly advised the Legislature to treat near-term strength in tax collections as temporary because we expect these gains to reverse. Further, the state faces significant structural deficits in the future.
https://lao.ca.gov/Publications/Detail/5133

The 2024-25 Budget: Proposition 2 Debt Payment Proposals

Mar 20, 2024 - As a result of how CalSTRS implements the division of responsibility for unfunded liabilities between the state and employers, the state ’s share —and consequently the state ’s supplemental rate —is particularly sensitive to investment return volatility.
https://lao.ca.gov/Publications/Report/4887