Things are looking up - for now

Jason Sisney of the Legislative Analyst's Office notes the unexpected inflow of income tax revenue into the state treasury - likely due to AI-related stock market gains:

From a Sept. 24 email to his subscribers: 

August Revenues Up $1.7 Billion from Budget Projections. California’s General Fund revenue collections in August 2025 outpaced budget projections for the month by $1.7 billion (13%), according to data released by the state’s Department of Finance. Gains in personal income tax (PIT) withholding (likely “due to stock-based compensation,” according to Finance) made up more than half of this monthly gain. Corporation tax refunds and payments also were nearly $300 million above the monthly projection. Federal cost recoveries related to disasters in prior years also have been coming in better than projected.

Waiting for Los Angeles County Tax Payments Next Month.

The coming weeks will be important for revenue tracking due to the federal government’s decision to delay this year’s income tax deadlines to October 15 for all of Los Angeles County due to the January wildfires in parts of that jurisdiction.

AI Bubble Driving Big State Revenue Gains.

Recently, California’s Legislative’s Analyst Office (LAO) has noted the strong trend in PIT withholding, stating in one report that higher state “income tax collections are being driven higher by enthusiasm around artificial intelligence (AI), which has pushed the stock market to record highs and boosted compensation” of California’s tech industry workers. The LAO adds that the “rest of the economy appears fragile.” The apparent AI bubble led LAO in one recent report to project that General Fund revenues—principally PIT revenues—would exceed previous budget forecasts by more than $20 billion across the three fiscal years 2024-25, 2025-26, and 2026-27.

Short-Term Revenue Gains May Help Moderate Big Budget Deficits Ahead. 

These short-term revenue gains, a large part of which will be directed to reserves and TK-12 schools under the State Constitution, may moderate large projected General Fund deficits in the coming few years...

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Some of us remember the dot-com boom when state revenues surged - until they didn't:

Or direct to https://www.youtube.com/watch?v=e7xiIzcYRpA.