California's fiscal outlook

Investment Analysis Clubs Macro Economic Trends and Risks
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The nonpartisan Legislative Analyst’s Office (LAO) now projects annual deficits of roughly $35 billion starting in 2027–28 in a new report this month.

2026-27 Budget Problem Now Larger Than Anticipated
Under our revenue and spending estimates, the Legislature faces an almost $18 billion budget problem in 2026-27. This is about $5 billion larger than the budget problem anticipated by the administration in June, despite improvements in revenue. This is because constitutional spending requirements under Proposition 98 (1988) and Proposition 2 (2014) almost entirely offset revenue gains. Moreover, we estimate costs in other programs to be about $6 billion higher than anticipated. Starting in 2027-28, we estimate structural deficits to grow to about $35 billion annually due to spending growth continuing to outstrip revenue growth.

DB2

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Given the politics going on, did any sane observer think it likely that we would see any other result?

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I suppose there was a possibility they would raise taxes faster than they increased spending. At any rate, I hope they make it through the next recession. (Gains from IPO listings are taxed as ordinary income and generate some 10-15% of the state’s general fund revenue.)

DB2

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