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

Building Reserves to Prepare for a Recession

Mar 7, 2018 - Simply put, the SFEU is the difference between spending and available resources (most notably, revenues) for a given fiscal year. In any year, its balance (the amount by which resources available exceed spending) is the state ’s discretionary reserve.
https://lao.ca.gov/Publications/Report/3769

A History of California’s Budget Reserves

Mar 24, 2017 - Simply put, the SFEU is the difference between state spending and state revenues for a given fiscal year. As such, its balance (the amount by which revenues exceed spending) is the state ’s discretionary reserve.
https://lao.ca.gov/Publications/Report/3630

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

Amid Good Fiscal Times, Planning for the Future Is Crucial

May 21, 2019 - Simply put, if the past is any indication, it is highly likely that capital gains revenue will materially differ from our current estimates. Our simulations also illustrated how the range of potential outcomes widens when looking further into the future.
https://lao.ca.gov/Publications/Report/4051

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

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

An Extraordinary Moment in California's Fiscal History

Apr 11, 2019 - Simply put, unlike what happened following the onset of the last two economic contractions, the Legislature cannot assume extraordinary federal aid will be forthcoming. This means that the brunt of the next downturn is likely to fall more squarely on the state than in those prior episodes.
https://lao.ca.gov/Publications/Report/4003

The 2018-19 May Revision: LAO Multiyear State Budget Outlook

May 17, 2018 - Simply put, the SFEU is the difference between state spending and state revenues for a given fiscal year. (Unlike the rainy day fund, which can only be used in a budget emergency, the SFEU is available at any time for any public purpose.)
https://lao.ca.gov/Publications/Report/3843

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