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

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 2024-25 Budget: Proposition 2 Debt Payment Proposals

Mar 20, 2024 - In general, the requirements tend to increase when revenues are growing more quickly and decline when revenue growth is lower. Unlike reserve deposits, which can be suspended in response to a budget emergency, Proposition  2 ‑related debt payments are required every year until 2029 ‑30.
https://lao.ca.gov/Publications/Report/4887

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

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 2022-23 Budget: Fiscal Outlook for Schools and Community Colleges

Nov 17, 2021 - Baseline costs grow more quickly in this scenario, reducing the amount available for new commitments to about $7 billion in 2023 ‑24 and about $9 billion in 2025 ‑26. Under Mild Economic Downturn, State Could Cover Existing Commitments Only.
https://lao.ca.gov/Publications/Report/4473

A Framework for Allocating Federal Recovery Funds

May 4, 2021 - To ensure programs are more quickly and effectively implemented, the Legislature may want to consider determining and including additional program details in legislation. We also recommend considering what resources might be needed to allocate resources effectively.
https://lao.ca.gov/Publications/Report/4422

The 2022-23 Budget: Overview of the Spending Plan

Oct 12, 2022 - When the minimum funding requirement is growing quickly, the Constitution requires the state to deposit some of the available funding into a statewide reserve account for schools and community colleges.
https://lao.ca.gov/Publications/Report/4616