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

The 2025-26 Budget: Overview of the Spending Plan

Oct 16, 2025 - Undoing this maneuver in the future will require the state to pay for two years’ worth of program costs in a single fiscal year. University Payment Deferrals ($274 Million). The budget defers University of California (UC) and California State University (CSU) payments that otherwise would have been made in May to June or July.
https://lao.ca.gov/Publications/Report/5079

California's Legislative Analyst's Office and the Value of Independence

Nov 15, 2024 - The added complexity from the alternative revenue estimates making this possible is a worthwhile price to pay. Reaffirming the LAO ’s Independent Mandate The LAO was established in 1941 because the Legislature sought an independent source of information and analysis —one directly accountable to it and serving as a fiscal watchdog on its behalf.
https://lao.ca.gov/Publications/Report/4938

The 2025-26 Budget: California's Fiscal Outlook

Nov 20, 2024 - Outside of government and health care, the state has added no jobs in a year and a half. Similarly, the number of Californians who are unemployed is 25  percent higher than during the strong labor markets of 2019 and 2022.
https://lao.ca.gov/Publications/Report/4939

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

May 17, 2025 - Fund shifts occur when the state uses alternative fund sources —such as special funds —to pay for costs typically borne by the General Fund. These actions reduce General Fund spending while displacing spending that otherwise would have been supported by the special funds.
https://lao.ca.gov/Publications/Report/5044

The 2026-27 Budget: California's Fiscal Outlook

Nov 19, 2025 - These companies have made big bets on AI, spending hundreds of billions of dollars on data centers and offering extraordinary pay packages to recruit AI researchers. This spending, coupled with sizable gains to investors and tech company employees via stock options, is boosting state income tax receipts.
https://lao.ca.gov/Publications/Report/5091

Rethinking California's Reserve Policy

Apr 10, 2025 - In this report, when revenues are insufficient for the state to pay for its core service level, we describe the difference as a funding shortfall. A funding shortfall is distinct from a budget deficit, which occurs when revenues are insufficient for the state to pay for all of its currently authorized services (not just core services).
https://lao.ca.gov/Publications/Report/5028

The 2024-25 Budget: Proposition 2 Debt Payment Proposals

Mar 20, 2024 - As we discuss later in this analysis, employers may not pay less than the amount established by CalPERS; however, employers can choose to pay more than the CalPERS Board establishes as the actuarially determined contribution.
https://lao.ca.gov/Publications/Report/4887

The 2021-22 Spending Plan: Other Provisions

Sep 23, 2021 - In September 2020, the Legislature instituted the Main Street Small Business Tax Credit, which provides income or sales tax credits to firms with 100 or fewer employees that added jobs in the second half of 2020.
https://lao.ca.gov/Publications/Report/4452

The 2023-24 California Spending Plan: Other Provisions

Nov 8, 2023 - Although the state and employees contribute money to prefund retiree health benefits earned today, the state pays for current retirees ’ health benefits on a pay-as-you-go basis. This pay-as-you-go cost grows each year as health premiums rise and the number of retired state workers grows.
https://lao.ca.gov/Publications/Report/4814