California’s Strong Revenue Trends Mask Looming Budget Risk

Jan 23, 2026 - To do this, we add a stock market indicator to our forecast models alongside other the economic variables. The added risk variable weighs on the range of revenue outcomes that we view as most plausible.
https://lao.ca.gov/Publications/Report/5104

2009-10 Budget Analysis Series: The Fiscal Outlook Under the February Budget Package [Publication Details]

Mar 13, 2009 - The budget uses both sides of the ledger—revenue increases and spending reductions—to attack the state’s dire fiscal situation. Unfortunately, the state’s economic and revenue outlook continues to deteriorate.
https://lao.ca.gov/Publications/Detail/1967

The 2021-22 Budget: CalWORKs Fiscal Outlook

Dec 8, 2020 - With this post we intend to provide information but do not include any explicit recommendations to the Legislature. Background CalWORKs Provides Cash Assistance and Employment Services to Low ‑Income Families.
https://lao.ca.gov/Publications/Report/4306

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

Jan 12, 2026 - First, after four years of projected deficits and a cumulative total of $125  billion in budget problems solved so far, the state ’s negative fiscal situation is now chronic. Second, structural deficits have grown —our November outlook is the most negative forecast of the budget ’s position since the pandemic.
https://lao.ca.gov/Publications/Report/5101

The 2026-27 Budget: California's Fiscal Outlook

Nov 19, 2025 - Second, while our revenue estimates hedge against a market downturn, they do not reflect the revenue declines the state would experience in a recession. Third, the state has used most of its budget resiliency tools to address prior deficits.
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 - This suggests that the Fed may have more inflation-fighting work to do. The Fed ’s continued efforts to lower inflation by raising the Fed funds rate has the effect of cooling the economy, which inherently raises the odds of a recession.
https://lao.ca.gov/Publications/Report/4762

The 2021-22 Budget: California's Fiscal Outlook

Nov 18, 2020 - While negative economic consequences of the pandemic have been severe, they do not appear to have been as catastrophic from a fiscal standpoint as the budget anticipated. But, the recovery has been uneven.
https://lao.ca.gov/Publications/Report/4297

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

Feb 20, 2026 - For example, we recommend the Legislature: Do Not Suspend the $3  Billion True Up Into the Budget Stabilization Account (BSA). The Governor ’s budget proposes suspending a roughly $3  billion true-up deposit that otherwise would be required in 2025-26.
https://lao.ca.gov/Publications/Report/5133

Rethinking California's Reserve Policy

Apr 10, 2025 - If the state has a more robust reserve policy, as recommended here, the Legislature would not want these rules —which do not always work as intended —to limit the use of reserves. Additionally, because the Governor can declare a budget emergency at any time in response to a disaster, authority to withdraw funds is already available near constantly.
https://lao.ca.gov/Publications/Report/5028

The State Appropriations Limit

Apr 21, 2021 - Within a few years, there is a good chance of a substantial amount of negative room. Specifically, by 2024 ‑25, the state is more likely than not to have negative room in excess of $ 10  b illion. As a result, we anticipate the Legislature will need to make —potentially major —changes to the state budget in the coming years.
https://lao.ca.gov/Publications/Report/4416