California’s Strong Revenue Trends Mask Looming Budget Risk

Jan 23, 2026 - After the dot-com bust and the Great Recession, it took four and five years, respectively, for revenues to recover. Incorporating revenue risk into the budget now, therefore, reflects prudence, not pessimism.
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 - These deposits were made in the 2006 ‑07 and 2007 ‑ 08 e nacted budgets when the economy was still expanding, but were quickly used to address budget deficits that emerged later on in the 2007 ‑08 fiscal year.
https://lao.ca.gov/Publications/Report/3769

Rethinking California's Reserve Policy

Apr 10, 2025 - Revenues Are Volatile … From year to year, state revenues can grow very quickly or contract quickly. Revenues drop during economic recessions, when business activity slows, unemployment rises, and consumer spending declines, leading to lower tax collections.
https://lao.ca.gov/Publications/Report/5028

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 2018-19 May Revision: LAO Economic Outlook

May 12, 2018 - The typical PE ratio since 1990 is 21 (19 if the dot-com bubble of the late 1990s and early 2000s is excluded). Similar to the price-to-earnings ratio, the home price-to-rent ratio is used to gauge if home prices are in line with underlying demand for housing.
https://lao.ca.gov/Publications/Report/3829

Cal Facts: 2016

Dec 5, 2016 - Cal Facts: 2016 Other Programs W ith a state as big, as populous, and as complex as California, it would be impossible to quickly summarize how its economy or state budget works. The purpose of Cal Facts is more modest.
https://lao.ca.gov/Publications/Report/3511

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 2014-15 Budget: California's Fiscal Outlook [Publication Details]

Nov 20, 2013 - For example, as we discuss in this report, an economic downturn within the next few years could quickly result in a return to operating deficits. In this report, we outline a strategic approach for allocating potential surpluses that prepares for the next economic downturn while paying for past commitments, maintaining existing programs, and making new budgetary commitments incrementally to address other public priorities.
https://lao.ca.gov/Publications/Detail/2814

Overview of the 2009-10 May Revision [Publication Details]

May 21, 2009 - By acting quickly and reducing reliance on some of the Governor’s riskiest proposals--such as financing $5.5 billion of the deficit by issuing revenue anticipation warrants--the Legislature can return the budget to balance, prevent another state cash crunch, and preserve core funding for what it deems to be California’s long–term priorities.
https://lao.ca.gov/Publications/Detail/2065