California’s Strong Revenue Trends Mask Looming Budget Risk

Jan 23, 2026 - While the Governor ’s budget describes the financial markets as a leading risk to the budget and assumes that stock market appreciation slows, it does not explicitly factor the risk of a market downturn into its revenue estimates.
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

Building Reserves to Prepare for a Recession

Mar 7, 2018 - By most measures, the recession of the early 1990s was more severe than the dot ‑com bust in the early 2000s. For example, unemployment in California reached 9. 7  p ercent in mid ‑ to late ‑1992, but peaked at 6. 9  p ercent after the dot ‑com bust.
https://lao.ca.gov/Publications/Report/3769

The 2018-19 May Revision: LAO Economic Outlook

May 12, 2018 - A multitude of factors, however, will influence the path of the state ’s economy in ways that are very difficult to anticipate. Some of these factors are discussed below. Tight Labor Markets. The state ’s unemployment rate (4.2  percent as of March  2018) is the lowest it has been in decades.
https://lao.ca.gov/Publications/Report/3829

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

May 17, 2025 - This budget problem is driven by two key factors: higher baseline spending, most notably in Medi‑Cal, and lower revenues, reflecting diminished expectations for both the personal income tax and the corporation tax.
https://lao.ca.gov/Publications/Report/5044

The 2025-26 Budget: Undertaking Fiscal Oversight

Feb 24, 2025 - Certain programs are more susceptible to external factors like federal policy changes, demographic shifts, or economic trends. In some cases, programs are designed intentionally to respond to these factors.
https://lao.ca.gov/Publications/Report/4983

Managing California’s Cash

Sep 3, 2019 - After a period of relative calm in the mid ‑ and late ‑1990s, California faced another series of years with acute budget problems following the dot ‑com bust and ensuing recession. Although the dot ‑com bust was relatively mild in economic terms, it hit the California budget —which is particularly reliant on the Bay Area ’s technology sector —especially hard.
https://lao.ca.gov/Publications/Report/4092

The 2019-20 Budget: California Spending Plan—Debt Liabilities

Oct 17, 2019 - The minimum required funding level is based on a series of formulas that depend on numerous factors. Most of the underlying factors are updated after adoption of the budget, and, in most cases, those changes result in changes to the minimum required funding level.
https://lao.ca.gov/Publications/Report/4106

Rethinking California's Reserve Policy

Apr 10, 2025 - However, in general, growth in core services tracks more stable factors, like inflation (especially inflation for pharmaceuticals and health care) and population (especially in some key demographic areas).
https://lao.ca.gov/Publications/Report/5028