SACRAMENTO -- California's budget is on track for multibillion dollar surpluses in the years ahead, the Legislature's budget analyst said Wednesday in an upbeat assessment of the state's fiscal picture.

"We now find that California's state budget situation is even more promising than we projected one year ago," said the report from the nonpartisan Legislative Analyst's Office. "The state's budgetary condition is stronger than at any point in the past decade."

The projection represents a stunning turnaround for a state that only a few years ago had a $26 billion deficit.

The state is on track to end the current fiscal year next June with a reserve of $2.4 billion, more than twice the original estimate of $1.1 billion, thanks to higher-than-expected tax revenue, the report said. California's school-funding formula is also expected to send $3.1 billion more to schools.

The state is projected to have a $5.6 billion reserve by June 2015. And by 2020, state revenue could be $27.1 billion higher than the latest projections for the current fiscal year, the report said.

Increased revenue could help cushion the state when temporary taxes under Proposition 30, Gov. Jerry Brown's tax measure that passed last year, expire in 2018. The analyst's office projects a $9.6 billion surplus that year.


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"This helps prevent a 'cliff effect,'" the report said.

The analyst's office cautioned that surpluses are dependent on several factors, most notably continued growth in the stock market. More federal budget standoffs in Congress, like the country has experienced in the past year, could harm California's finances, the report said.

"Despite the large surplus that we project over the forecast period, the state's continued fiscal recovery is dependent on a number of assumptions that may not come to pass," Legislative Analyst Mac Taylor wrote.

Assembly Speaker John A. Perez, D-Los Angeles, issued a statement saying the new numbers "validate the wisdom of the fiscal actions the Legislature and governor have taken." He said he would continue pushing for a new ballot measure to help California save money in a rainy-day fund -- something the state has lacked in recent years.

State Finance Director Michael Cohen said that "the state's budget has come a long way in the past three years."

But he cautioned that "any additional revenue that materializes will be inextricably linked to capital gains -- the state's most volatile revenue source." And, he noted, "recent history reminds us painfully of what happens when the state makes ongoing spending commitments based on what turn out to be one-time spikes in capital gains."

As a result, Cohen said, "We're pleased that the analyst's report shares the governor's view that discipline remains the right course of action. The focus must continue to be on paying down the state's accumulated budgetary debt and maintaining a prudent reserve to ensure that we do not return to the days of $26 billion deficits."

The Los Angeles Times, Fresno Bee and staff writer Jessica Calefati contributed to this report.