California’s Strong Revenue Trends Mask Looming Budget Risk

Jan 23, 2026 - Second, the Governor proposed suspending a $2.8  billion true-up deposit to the state ’s reserve that otherwise would be required. This proposal helps balance the budget but runs counter to the basic fiscal logic that stronger-than-expected revenues should be used to build reserves.
https://lao.ca.gov/Publications/Report/5104

The 2026-27 Budget: California's Fiscal Outlook

Nov 19, 2025 - This is because constitutional spending requirements under Proposition  98 (1988) and Proposition  2 (2014) almost entirely offset revenue gains. Moreover, we estimate costs in other programs to be about $6  billion higher than anticipated.
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 - Three of those —the recession in the early 1990s, the dot ‑com bust in the early 2000s, and the Great Recession —resulted in large revenue shortfalls and ensuing multiyear deficits, even for some years after each recession ended.
https://lao.ca.gov/Publications/Report/4687

Rethinking California's Reserve Policy

Apr 10, 2025 - In March of 2004, on the heels of the dot ‑com bust, voters passed Proposition  58, which created the Budget Stabilization Account (BSA). In the 2006 ‑07 budget, the Legislature deposited $472  million into the BSA and in 2007 ‑08 deposited $1.5  billion.
https://lao.ca.gov/Publications/Report/5028

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

Jan 12, 2026 - 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 2026-27 Budget: How to Use One-Time Revenue Improvements

Feb 20, 2026 - The Governor ’s budget proposes suspending a roughly $3  billion true-up deposit that otherwise would be required in 2025-26. We recommend the Legislature not suspend this deposit. Make a Smaller Withdrawal From the BSA.
https://lao.ca.gov/Publications/Report/5133

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 State Appropriations Limit

Apr 21, 2021 - The state ’s appropriations subject to the limit fell substantially during the dot ‑com bust in the early 2000s and again during the Great Recession due to the significant decline in state revenues during those downturns.
https://lao.ca.gov/Publications/Report/4416

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

May 17, 2025 - Proposition  98 (1998) sets a minimum funding requirement for schools and community colleges based on formulas in the State Constitution. Compared with the Governor ’s budget, the General Fund portion of this requirement is down $3.9  billion across 2024 ‑25 and 2025 ‑26.
https://lao.ca.gov/Publications/Report/5044