California’s Strong Revenue Trends Mask Looming Budget Risk

Jan 23, 2026 - Moreover, investors have been aggressive in taking on high levels of margin debt (borrowing to buy stocks), which has reached approximately three times the historical norm. These and other indicators are at levels previously only seen at times when the market was approaching a peak before entering a period of retrenchment.
https://lao.ca.gov/Publications/Report/5104

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

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

Apr 19, 2023 - Other downturns, such as the 2001 so-called dot-com recession, had severe fiscal implications while inflicting somewhat milder economic damage. The 2008 Great Recession had brutal effects on both the state ’s economy and budget.
https://lao.ca.gov/Publications/Report/4762

The 2023-24 Budget: Multiyear Assessment

Feb 15, 2023 - Although state revenues are moderating from a historic peak, they are not yet consistent with recessionary levels. Using reserves now to maintain the recent spending peak would mean the state would have less reserves available to pay for its core services if revenues declined further or in the event of a recession.
https://lao.ca.gov/Publications/Report/4687

Rethinking California's Reserve Policy

Apr 10, 2025 - Put another way, if current law remained in place for the next 50  years, and without further saving above this level, cuts to core services and/or tax increases would often be necessary. Governor ’s Proposal Improves Upon Current Law, but Further Improvements Are Warranted.
https://lao.ca.gov/Publications/Report/5028

The 2026-27 Budget: How to Use One-Time Revenue Improvements

Feb 20, 2026 - Further, the state faces significant structural deficits in the future. Accordingly, any windfall received from this revenue uptick represents an opportunity for the Legislature to prepare for future fiscal challenges.
https://lao.ca.gov/Publications/Report/5133

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

Jan 12, 2026 - Further amplifying this precariousness, even under the administration ’s more optimistic revenues, the budget is only roughly balanced in the near term. Multiyear Budget Deficits Alarming. Both our office and the administration expect the state to face multiyear deficits, with estimates ranging from $20  billion to $35  billion annually.
https://lao.ca.gov/Publications/Report/5101

The 2026-27 Budget: How to Use One-Time Revenue Improvements [Publication Details]

Feb 20, 2026 - Recent stock market performance continues to boost income tax collections. In our Fiscal Outlook, we strongly advised the Legislature to treat near-term strength in tax collections as temporary because we expect these gains to reverse. Further, the state faces significant structural deficits in the future.
https://lao.ca.gov/Publications/Detail/5133

The 2025-26 Budget: Overview of the Spending Plan

Oct 16, 2025 - (In January and May, we had categorized settle up as a spending delay, but upon further deliberation, we view this action as borrowing.) Middle Class Scholarships (MCS) Arrears Budgeting ($1 Billion).
https://lao.ca.gov/Publications/Report/5079

The 2026-27 Budget: Overview of the Governor's Budget [Publication Details]

Jan 12, 2026 - On January 9, 2026, Governor Newsom’s administration presented its proposed state budget to the California Legislature. In this report, we provide a high-level summary and our initial analysis of the Governor’s budget based on our preliminary review (as of January 10). Assembly Budget Handout (PDF) Senate Budget and Fiscal Review Handout (PDF)
https://lao.ca.gov/Publications/Detail/5101