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 2023-24 Budget: Multiyear Assessment

Feb 15, 2023 - Our analysis starts by estimating how much revenues ultimately could differ from our Fiscal Outlook multiyear revenue forecast (with updated current ‑year estimates) based on the state ’s historical experience.
https://lao.ca.gov/Publications/Report/4687

The 2025-26 Budget: Overview of the Spending Plan

Oct 16, 2025 - During the special session, the Legislature added Control Sections 90.00 and 90.01 to the 2024 ‑25 Budget Act providing up to $2.5  billion one ‑time for response and recovery costs related to the January 2025 Southern California wildfires.
https://lao.ca.gov/Publications/Report/5079

The 2025-26 Budget: Overview of the Governor's Budget

Jan 13, 2025 - We suggest the Legislature take heed of these risks and avoid putting too much stock in the recent revenue rebound until it is accompanied by clear improvements in California ’s broader economy. Governor ’s Use of Reserves Remains Reasonable.
https://lao.ca.gov/Publications/Report/4951

The 2026-27 Budget: California's Fiscal Outlook

Nov 19, 2025 - With so much exuberance surrounding AI, it now appears time to take seriously the notion that the stock market has become overheated. History suggests that the stock market is prone to overreact to major technological advances, even if the technology itself turns out to be revolutionary.
https://lao.ca.gov/Publications/Report/5091

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: Overview of the Governor's Budget

Jan 12, 2026 - Second, we found that spending was much higher than had been anticipated in June, in large part due to the state ’s constitutional requirements eroding revenue gains. Administration ’s Higher Revenue Estimate Significantly Improves Budget Condition.
https://lao.ca.gov/Publications/Report/5101

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

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