California's state budget, larger than the GDP of some countries, faces significant fluctuations, impacting the nation's most populous state and the world's fifth-largest economy. The state's taxation system, reliant on personal income and capital gains taxes, leads to volatility, with revenue surging in good years and plummeting in downturns. To manage this, the state has implemented measures such as a reserve fund and budget reforms. However, recent swings from surplus to shortfall have posed challenges, with the current deficit projected at around $27.6 billion. Governor Newsom and legislators are negotiating a budget deal that may address structural issues, including plans to increase the rainy-day fund and create a temporary account for future surpluses. The final legislation is expected to be announced soon, with a 72-hour review period before voting.