SACRAMENTO, CA — In response to the Legislative Analyst’s Office’s (LAO) 2026-27 Fiscal Outlook, the California Budget & Policy Center (Budget Center), a nonpartisan research and analysis nonprofit, issued the following statement from its budget director, Scott Graves:
“Despite higher income tax collections, the LAO’s 2026–27 Fiscal Outlook estimates that California still faces an $18 billion shortfall as rising program needs and federal cost shifts outpace revenues.
“While these stronger-than-expected returns have boosted state revenues, they reflect a deeply unequal economy: one in which a small number of wealthy investors are doing exceptionally well, even as everyday Californians continue to struggle with rising costs and a weak labor market.
“As policymakers prepare for the 2026-27 budget cycle, they should pursue common-sense solutions like closing costly and ineffective corporate tax breaks that benefit highly profitable corporations. Many of these same corporations benefit from the recently enacted Republican megabill, H.R. 1, which stripped health care and food assistance from millions of Americans to pay for corporate tax cuts.
“Rising costs in health and safety net programs signal that Californians need and value access to affordable health care and other supports, especially as federal funding continues to erode. Pulling back now could worsen health outcomes for Californians and potentially increase long-term costs for the state. Policymakers must do everything possible to maintain and strengthen these core investments.
“Kicking the can down the road won’t solve California’s structural deficit and neither will cutting programs that support vulnerable communities. Policymakers must choose sustainable revenue solutions that protect Californians, ensure corporations pay their fair share, and strengthen the state’s long-term fiscal health.”
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About revenue estimates:
Estimating state revenues is inherently difficult and projections have become even more challenging amid rapid shifts in federal policy and economic conditions. The governor’s administration will release its own revenue and spending estimates in its budget proposal by January 10, which may rely on different assumptions than the LAO’s forecast. California’s fiscal picture could also shift significantly by next June, when state lawmakers and the governor finalize the 2026–27 state budget.
About the California Budget & Policy Center:
The California Budget & Policy Center (Budget Center) is a nonpartisan research and analysis nonprofit advancing public policies that expand opportunities and promote well-being for all Californians.
