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 - As shown in Figure  1 , many signs of an overly exuberant stock market are present today: measures of whether stocks are “expensive ” are at historically high levels, investors are borrowing more to buy stocks, and households are more invested in the stock market than they have been in at least 70  years.
https://lao.ca.gov/Publications/Report/5091

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

Jan 12, 2026 - Generates $5.6 Billion School and Community College Settle‑Up Obligation in 2025‑26. The State Constitution sets a minimum spending requirement for schools and community colleges. For 2025‑26, this requirement is up $6.9 billion under the administration’s estimates, but the Governor’s budget provides $5.6 billion less than this revised estimate.
https://lao.ca.gov/Publications/Report/5101

The 2025-26 Budget: Overview of the Spending Plan

Oct 16, 2025 - Funding schools and community colleges at this level —$1.9  billion below the estimate of minimum requirement —provides temporary savings but requires the state to settle up using future revenues. The state will finalize its calculation of this obligation in May  2026.
https://lao.ca.gov/Publications/Report/5079

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

May 17, 2025 - General Fund Spending on Schools and Community Colleges Lower by $3.9   Billion. Proposition  98 (1998) sets a minimum funding requirement for schools and community colleges based on formulas in the State Constitution.
https://lao.ca.gov/Publications/Report/5044

The 2022-23 Budget: Fiscal Outlook for Schools and Community Colleges

Nov 17, 2021 - Potential Effects on School and Community College Funding. The effects on schools and community colleges depend on how the state responds to the limit. For example, the Legislature could split the excess revenues between taxpayer rebates and additional school and community college spending.
https://lao.ca.gov/Publications/Report/4473

Rethinking California's Reserve Policy

Apr 10, 2025 - Given the division of the budget and the separate reserve policies in place for schools and community colleges, this report focuses only on the reserve policy for the rest of the budget. That is, the recommendations and estimates in this report only address revenue volatility for the side of the budget that does not include schools and community colleges, and
https://lao.ca.gov/Publications/Report/5028

The 2024-25 Budget: Initial Comments on the Governor’s May Revision

May 17, 2024 - This difference is largely due to differences in two areas: Schools and Community Colleges. Our calculation of the budget problem assumes $22  billion in higher baseline spending on schools and community colleges.
https://lao.ca.gov/Publications/Report/4902

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

Jan 13, 2025 - Savings Proposals Generates $1.6 Billion School and Community College Settle‑Up Obligation in 2024‑25. The Governor’s budget proposes providing $1.6 billion less in total funding for schools and community colleges than the estimated constitutional minimum funding level for 2024‑25.
https://lao.ca.gov/Publications/Report/4951

The 2025-26 Budget: Multiyear Budget Outlook

May 24, 2025 - Offsetting this, our projections for school and community college spending are higher, reflecting Proposition  98 (1988) formulas that typically increase (or decrease) with changes in revenue. Additionally, our estimates for spending in other areas —primarily health and human services programs —are somewhat higher than the administration ’s projections.
https://lao.ca.gov/Publications/Report/5052