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

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

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

The 2023-24 Budget: Multiyear Assessment

Feb 15, 2023 - (Many other factors also will affect the actual size of the budget problem.) That  said, after adjusting for inflation, anticipated revenues for 2023 ‑24 still would remain about 20  percent higher than before the pandemic.
https://lao.ca.gov/Publications/Report/4687

The State Appropriations Limit

Apr 21, 2021 - The state ’s appropriations subject to the limit fell substantially during the dot ‑com bust in the early 2000s and again during the Great Recession due to the significant decline in state revenues during those downturns.
https://lao.ca.gov/Publications/Report/4416

The 2024-25 Budget: Initial Comments on the Governor’s May Revision

May 17, 2024 - There are four notable factors contributing to this difference. First, in April, the Legislature passed an early action package that reduced the size of the budget problem by $17.3  billion (Chapter  9 of 2024 [AB  106, Gabriel]).
https://lao.ca.gov/Publications/Report/4902

The 2023-24 Budget: California's Fiscal Outlook

Nov 16, 2022 - The limit is calculated by adjusting last year ’s limit for a growth factor that includes economic and population growth. Appropriations subject to the limit are determined by taking all proceeds of state taxes and subtracting excluded spending.
https://lao.ca.gov/Publications/Report/4646