Summary At the time the 2006-07 budget was passed last June, our longer-term revenue and expenditure projections indicated that California continued to face a significant budget problem. Although we estimated that California would conclude 2006-07 with a General Fund reserve of over $2 billion, we projected that the state would face operating shortfalls (that is, annual differences between revenues and expenditures) in the range of $4.5 billion to $5 billion during the subsequent two fiscal years. Our updated projections suggest a larger reserve in 2006-07 than we previously forecast, but also larger projected operating shortfalls in the out years. Specifically:...