Guidance from the Legislative Analyst’s Office:
Relative to the state’s budgetary position in January, the additional budgetary commitments described above leave the state budget somewhat more vulnerable to the next economic downturn.
In the May Revision, the Governor lowered his 2016-17 proposed level of total reserves to $8.5 billion, nearly $2 billion lower than in his January proposal. Our office suggests the Legislature adopt a robust target for budget reserves for the end of 2016-17.
There is no single ideal level for reserves. However, at this point in a mature economic expansion, we think it would be prudent to pursue a target for total reserves that is at least as large as the $8.5 billion amount in the Governor’s revised budget proposal.
http://www.lao.ca.gov/Publications/Report/3460