State Budget Proposal Uses Reserves to Balance Current and Next Year

A revised state budget proposal balances spending for the 2026-27 fiscal year and the next year using reserves and other one-time resources. Officials said the plan avoids deficits in the immediate period but relies on maneuvers that leave structural gaps afterward.

Legislative analysts reviewed the proposal and found that revenues would fall short of planned expenditures by roughly $10 billion annually from 2026-27 through 2029-30.

The analysis defined a structurally balanced budget as one where revenues collected in a fiscal year match expenditures planned for that same year. Under the current estimates, the ongoing gap would require future adjustments beginning in 2027-28. The proposal covers the current year and the first year after the current administration ends.

Analysts noted that the use of reserves and similar steps addresses short-term needs while the longer-term shortfall remains. If enacted, the plan would allow the current administration to complete its term with balanced figures for the next 18 months.

The underlying revenue and spending mismatch would continue into subsequent years.