California’s Strong Revenue Trends Mask Looming Budget Risk

Jan 23, 2026 - The added risk variable weighs on the range of revenue outcomes that we view as most plausible. The middle of the range, which becomes our main revenue forecast, is thus lower than if we did not include the stock market risk indicator.
https://lao.ca.gov/Publications/Report/5104

The 2025-26 Budget: Overview of the Spending Plan

Oct 16, 2025 - By shifting payments to the next fiscal year, these deferrals create one‑time savings in 2025‑26. Similar to other forms of borrowing, undoing these deferrals in the future (and reverting payments to their typical schedule) will require the state to provide one‑time back payments to the universities.
https://lao.ca.gov/Publications/Report/5079

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

Nov 15, 2024 - As such, our independent fiscal assessment underlies the Legislature ’s ability to assert an informed check on the executive branch, making any added complexity from diverging estimates a worthwhile trade-off.
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 2023-24 Budget: Multiyear Assessment

Feb 15, 2023 - This means the state is more likely to face budget problems over the next few years if the Governor ’s budget is adopted. This situation makes legislative choices about budget solutions this year particularly pertinent.
https://lao.ca.gov/Publications/Report/4687

Despite Fiscal Forecasting Uncertainties, Multiyear Budget Planning Essential

May 27, 2021 - Yet even this amount may be too much. Whereas DOF projects future revenue growth to slow, we expect the out-year cost of these spending proposals (and underlying costs) would increase significantly. This combination is untenable and is what gives rise to the operating deficits shown in our multiyear outlook.
https://lao.ca.gov/Publications/Report/4443

Whether or Not to Tap Reserves to Solve Estimated Budget Problem Emerges as Key Fiscal Decision Facing California’s Legislature

Apr 19, 2023 - The implication is that as prudent as the one-time and temporary spending allocations were, General Fund spending remains too high relative to revenue performance typical of historic norms. At the same time, we have estimated that revenues are much more likely to be sufficient to cover the state ’s baseline commitments —which are expenditures stripped of the one-time and temporary allocations.
https://lao.ca.gov/Publications/Report/4762

The 2026-27 Budget: California's Fiscal Outlook

Nov 19, 2025 - In the past, these patterns have been a sign that a stock market downturn will occur in the next couple of years. There certainly is some chance that this time is different and such a downturn is not forthcoming.
https://lao.ca.gov/Publications/Report/5091

Rethinking California's Reserve Policy

Apr 10, 2025 - Proposition  2 limits how much can be saved in the constitutional reserve to 10  percent of General Fund taxes. (There is no limit on how much can be saved on a discretionary basis.) Currently, this is about $21  billion.
https://lao.ca.gov/Publications/Report/5028

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

Jan 12, 2026 - Several historically reliable signs suggest the stock market is overheated and at high risk of reversing course into a downturn in the next year or so. Should a stock market downturn occur, income tax revenues would fall considerably.
https://lao.ca.gov/Publications/Report/5101