DAS Office of Economic Analysis Presents Q2 June Economic Outlook and Revenue Forecast

State Chief Economist Carl Riccadonna and Senior Economist Michael Kennedy presented the latest economic outlook and revenue forecast to the Senate Interim Committee on Finance and Revenue, and House Interim Committee on Revenue on Wednesday, May 20.

What is different about this forecast?

At the beginning of the year, many economists forecasted the U.S. economy to grow faster in 2026 than it did in 2025. Stronger growth was expected to help improve a stagnant national labor market. However, tensions in the Middle East resulted in a severe energy price increase that is putting strain on consumers and businesses. As a result, economic growth forecasts for 2026 have been downgraded.

From a revenue perspective, ongoing financial market gains and resilient corporate profit trends are offsetting employment-related weakness.

Revenue Forecast

This quarter’s General Fund revenue forecast is now projected to be $345 million higher than the prior forecast. The increase is due to the Legislature’s action during the 2026 legislative session, which includes disconnecting from various provisions of the 2025 federal tax cuts (H.R. 1). These actions made up for some unexpected weakness in the economy and tax receipts to date. Without these actions, the forecast would have been down by $23 million.

About the Office of Economic Analysis

The state chief economist oversees the Office of Economic Analysis, within the Department of Administrative Services, and provides objective forecasts of the state’s economy, revenue, populations, corrections population and Youth Authority population. These forecasts are used across state government, and by the public for a variety of reasons, notably to inform the state budgeting process. For more information about the Office of Economic Analysis (OEA) and recent forecasts, visit the OEA website.