The last 30 May Revisions: a look at trends of proposed fund balances and reserves
Governor's proposal aims to keep state cash holdings significant in the coming year
The Governor’s May Revision proposal appears to boast the highest level of General Fund balances and reserves ever included in a May Revision proposal. Inclusive of the General Fund’s estimated $32.5 billion fund balance in the May Revision, the $9.7 billion proposed to be deposited temporarily to the Projected Surplus Temporary Holding Account, and $25 billion held in the rainy day fund and the Proposition 98 rainy day fund, these fund balances and reserves total around $68 billion in the May Revision. This is equivalent to 27.4% of estimated General Fund expenditures in 2026-27.
If the Projected Surplus Temporary Holding Account—slated to be drawn down in 2027-28—were excluded, the line would still peak at 23.5% in 2026-27.
Over time, characterizations of reserves have changed in May Revision documents, so fund balance is used in the figure above for a standard measure over time. Typically, in recent decades, a “reserve for encumbrances” has been deducted from fund balance in administration documents to show the remaining reserve amount in the Special Fund for Economic Uncertainties (SFEU). Encumbrances, in general terms, are funds obligated in a fiscal year or prior years that have not yet been paid out of fund balance. In the May Revision, the encumbrance reserves continues to be elevated compared to many prior years—at $28 billion, which leaves an SFEU projected balance of $4.5 billion.
After deducting encumbrances, the General Fund’s related reserves for 2026-27, as estimated in the Governor’s May Revision, include:
$4.5 billion in the SFEU.
$9.7 billion transferred to the Projected Surplus Temporary Holding Account (to be drawn down to help balance the 2027-28 budget).
$10.3 billion in the Proposition 98 rainy day fund, the Public School System Stabilization Account (also available for community colleges).
$15.1 billion in the main rainy day fund, the Budget Stabilization Account.
The $40 billion listed in the four bullets above equal 16.1% of projected General Fund expenditures in 2026-27.
These reserves create the prospect of stable to growing state cash holdings over the next fiscal year, assuming a benign economic trajectory in line with the administration’s projections. The state treasury—including local funds invested in the state treasury pool—held $170.6 billion, on average, in April. Of that amount, about $117 billion was available to or borrowable by the General Fund as of April 30.
The administration’s multiyear forecast summary, which includes future projected deficits of about $10 billion per year after 2027-28 through 2029-30, is here.