California’s Strong Revenue Trends Mask Looming Budget Risk

Jan 23, 2026 - Were the markets to drop considerably, budget problems would be tens of billions of dollars larger, necessitating even deeper cuts and/or tax increases. These challenges would not be short-lived either.
https://lao.ca.gov/Publications/Report/5104

The 2025-26 Budget: Initial Comments on the Governor's May Revision

May 17, 2025 - The largest May Revision discretionary proposal relates to the base funding cuts for UC and CSU. The May Revision reduces planned base cuts from 7.95  percent, as agreed to in last year ’s budget, to 3  percent.
https://lao.ca.gov/Publications/Report/5044

Rethinking California's Reserve Policy

Apr 10, 2025 - If reserves are insufficient to cover these shortfalls, the state must eventually: (1)  raise taxes or (2)  cut those services. This means that the more reserves the state has, the more it can mitigate the need for those cuts and tax increases.
https://lao.ca.gov/Publications/Report/5028

The 2021-22 Budget: Multiyear Budget Outlook

May 23, 2021 - Case in point, as we discuss below, under the administration ’s estimates, the Legislature needs to cut back May Revision spending by several billion dollars to avoid a projected operating deficit in future years.
https://lao.ca.gov/Publications/Report/4437

The 2024-25 Budget: Deficit Update

Feb 20, 2024 - Saving them to deploy in the future can help the Legislature avoid cuts to ongoing services —which involve very difficult decisions. For example, in the Great Recession, the programs with some of the largest expenditure reductions were in health and human services, including to Medi-Cal, which provides health coverage to low-income individuals and the California Work Opportunity
https://lao.ca.gov/Publications/Report/4850

The 2024-25 Budget: Initial Comments on the Governor’s May Revision

May 17, 2024 - More colloquially, these are spending cuts. The May Revision includes $16  billion in spending-related reductions. This includes: One-Time and Temporary Reductions. Within the budget window, the May Revision eliminates or reduces over $11  billion in one-time or temporary spending.
https://lao.ca.gov/Publications/Report/4902

The 2024-25 Budget: California's Fiscal Outlook

Dec 7, 2023 - Before resorting to cuts or deferrals, however, the state could reduce spending in other ways that would be less disruptive for  schools. Proposition   98 Reserve Could Cover Spending Above the Minimum Requirement in 2022 ‑23.
https://lao.ca.gov/Publications/Report/4819

The 2023-24 Budget: Multiyear Assessment

Feb 15, 2023 - Over the long ‑term, the state can avoid cuts to core spending by setting aside money in reserves when revenues are peaking and spending those amounts during downturns. In other words, given the volatility in the state ’s revenues, reserves are the state ’s key tool for avoiding cuts to  core  spending.
https://lao.ca.gov/Publications/Report/4687

The 2024-25 Budget: Overview of the Spending Plan

Sep 6, 2024 - Specifically, the budget cuts $400   million from the Active Transportation Program, $200   million planned for grade separation projects, and $75   million from the Highways ‑to ‑Boulevards Pilot Program.
https://lao.ca.gov/Publications/Report/4922

The 2022-23 Budget: State Appropriations Limit Implications

Mar 30, 2022 - In this scenario, the state would be required to cut non‑constitutionally required spending to solve the budget problems. Regardless of Revenue Growth, Future Budget Problems Are Very Likely Under the Governor ’s Budget.
https://lao.ca.gov/Publications/Report/4583