California’s Strong Revenue Trends Mask Looming Budget Risk

Jan 23, 2026 - At this point, stock prices are trading at a rich premium relative to corporate profits. 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.
https://lao.ca.gov/Publications/Report/5104

New Inflation Poses Not So New Budget Risk

Dec 15, 2022 - These factors weigh on the value of riskier assets, like home and stock prices. Historically, the reduction in spending by consumers and businesses resulting from higher interest rates is effective at easing the upward pressure on wages and prices.
https://lao.ca.gov/Publications/Report/4653

The 2025-26 Budget: California's Fiscal Outlook

Nov 20, 2024 - Because this form of compensation is tied to the company ’s stock price, it rises when stock prices rise. Other forms of pay, such as bonuses to workers in the financial sector, also tend to rise when financial markets are doing well.
https://lao.ca.gov/Publications/Report/4939

The 2023-24 Budget: Considering Inflation's Effects on State Programs

Nov 16, 2022 - In some areas, the unpredictability of inflation —swings in the rate of growth of prices —can pose greater issues. If inflation is high, but stable, contractors and developers can plan for it and account for growth in prices in projections.
https://lao.ca.gov/Publications/Report/4647

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

Nov 15, 2024 - The added complexity from the alternative revenue estimates making this possible is a worthwhile price to pay. Reaffirming the LAO ’s Independent Mandate The LAO was established in 1941 because the Legislature sought an independent source of information and analysis —one directly accountable to it and serving as a fiscal watchdog on its behalf.
https://lao.ca.gov/Publications/Report/4938

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

May 17, 2025 - According to the administration, this growth is largely due to higher ‑than ‑anticipated per ‑enrollee costs, which reflects a range of factors like greater utilization of services, increased prices for medical care, and expanded use of high ‑cost specialty drugs.
https://lao.ca.gov/Publications/Report/5044

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

Apr 19, 2023 - Although inflation, as measured by the consumer price index, appears to be trending down from the recent peak of 9.1  percent in June 2022, as of March, it remained 5  percent, or 2.5 times the Federal Reserve ’s (the Fed ’s) target.
https://lao.ca.gov/Publications/Report/4762

The 2024-25 Budget: Overview of the Spending Plan

Sep 6, 2024 - The state calculates the statutory COLA each year based on a price index published by the federal government. For 2024 ‑25, the budget provides $1  billion to cover a 1.07  percent COLA for existing school and community college programs.
https://lao.ca.gov/Publications/Report/4922

The 2024-25 California Spending Plan: Other Provisions

Oct 2, 2024 - Specifically, it would allow DGS to enter into competitively bid, fixed price, indefinite quantity contracts for certain public works. This could reduce the number of separate contracts DGS uses to procure services, such as roofing, painting, or plumbing.
https://lao.ca.gov/Publications/Report/4934

The 2024-25 California Spending Plan: Other Provisions

Oct 2, 2024 - Specifically, it would allow DGS to enter into competitively bid, fixed price, indefinite quantity contracts for certain public works. This could reduce the number of separate contracts DGS uses to procure services, such as roofing, painting, or plumbing.
https://lao.ca.gov/Publications/Report/4934/governors-office-of-emergency-services