California’s Strong Revenue Trends Mask Looming Budget Risk

Jan 23, 2026 - And most of this increase has come from skyrocketing share prices among a handful of firms associated with innovations in Artificial Intelligence (AI). These firms have invested heavily in building out data centers and on extraordinary pay packages for their key employees.
https://lao.ca.gov/Publications/Report/5104

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

Jan 12, 2026 - Under two voter initiatives, the State Constitution requires the state to set aside a share of revenues for schools and community colleges (Proposition  98, 1988) and debt payments and reserve deposits (Proposition  2, 2014).
https://lao.ca.gov/Publications/Report/5101

Rethinking California's Reserve Policy

Apr 10, 2025 - In March of 2004, on the heels of the dot ‑com bust, voters passed Proposition  58, which created the Budget Stabilization Account (BSA). In the 2006 ‑07 budget, the Legislature deposited $472  million into the BSA and in 2007 ‑08 deposited $1.5  billion.
https://lao.ca.gov/Publications/Report/5028

The 2026-27 Budget: California's Fiscal Outlook

Nov 19, 2025 - For California, the dot ‑com era —when stocks rose and then fell precipitously in response to widespread adoption of the internet —offers the most salient example. The internet has proven to be a transformative technology and, yet, the stock market ’s initial reaction was clearly overly exuberant.
https://lao.ca.gov/Publications/Report/5091

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

May 17, 2025 - While  these cost increases affect all enrollee groups, the administration attributes a significant share of the growth to higher costs associated with individuals lacking satisfactory immigration status.
https://lao.ca.gov/Publications/Report/5044

The 2025-26 Budget: Multiyear Budget Outlook

May 24, 2025 - While the majority of those deficits have been solved using spending reductions, a non-negligible share of the solutions have relied on budgetary borrowing. Some of this borrowing is similar to the measures used during the Great Recession —collectively previously referred to as the state ’s “wall of debt, ” which was defined as nonroutine borrowing mechanisms enacted to address persistent deficits.
https://lao.ca.gov/Publications/Report/5052

The State Appropriations Limit

Apr 21, 2021 - The state ’s appropriations subject to the limit fell substantially during the dot ‑com bust in the early 2000s and again during the Great Recession due to the significant decline in state revenues during those downturns.
https://lao.ca.gov/Publications/Report/4416

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

The 2023-24 Budget: Multiyear Assessment

Feb 15, 2023 - Three of those —the recession in the early 1990s, the dot ‑com bust in the early 2000s, and the Great Recession —resulted in large revenue shortfalls and ensuing multiyear deficits, even for some years after each recession ended.
https://lao.ca.gov/Publications/Report/4687

The 2022-23 Budget: Medi-Cal Fiscal Outlook

Nov 17, 2021 - For example, Congress approved a 6.2  percentage point increase in the federal government ’s share of cost for most Medicaid services for the duration of the PHE. In addition, the same federal legislation effectively prohibits the state (as a condition of receiving the enhanced federal share of Medicaid costs) from terminating the eligibility of current Medi ‑Cal enrollees, except in limited circumstances, until after the PHE ends.
https://lao.ca.gov/Publications/Report/4474