The Legislative Analyst’s Office (LAO) has released its latest analysis of the 2025-2026 state budget. This report examines the impact of existing state and federal laws, as well as policies the California Legislature has consistently enacted, including those that maintain current levels of public service.
The analysis highlights that increased income tax revenues, largely driven by stock market gains and earnings among high-income individuals, have improved the state’s financial standing, moving the budget to a “roughly balanced” position. However, despite these improvements, the state is projected to face ongoing operating deficits in future years. However, despite these improvements, the state is projected to face ongoing operating deficits in future years. For further details, the full LAO report may be accessed here.