(280 Pages, 13MB) The Governor's Budget for 1987-88 reflects an anticipated temporary slowdown in the California economy. Projected revenues will not be sufficient to both fund the current level of services and restore the reserve to a $1 billion level. Faced with this choice, the budget gives its highest priority to the restoration of the reserve. Even though state revenues are projected to decline in "real" terms, the state's constitutional limit on appropriations could further restrain the state's ability to maintain the level of services provided to its citizens. Here, we provide a brief overview of the state's fiscal condition in 1986 and 1987, discuss the state's budget prospects beyond the upcoming year, and examine revenues and expenditures in detail.