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California facing projected $18B deficit as Newsom heads into his last year as governor
The Legislative Analyst's Office projects a shortfall driven by mandatory spending and rising program costs, including a $1.3 billion increase from federal policy changes.
- On Wednesday, Legislative Analyst Gabe Petek said California faces a nearly $18 billion budget deficit next year, the Legislative Analyst's Office update said.
- At the center are program costs and mandates, with programs costing about $6 billion more than expected and federal funding cuts raising Medi‑Cal and CalFresh costs by about $1.3 billion over the past year.
- Despite revenue gains from high earners and the market, July through October revenue surplus was about $6 billion ahead, and the LAO's estimate is about $5 billion larger than Gov. Gavin Newsom initially expected.
- The LAO advised cutting spending or raising revenue, calling it 'critical' as structural deficits persist, reserves dwindle, and a recession could worsen the shortfall before Gov. Gavin Newsom’s January budget.
- In a matter of months, state lawmakers and Gov. Gavin Newsom must finalize a 2026-2027 budget plan by July 2026, with the LAO's annual midcycle outlook stressing ongoing solutions amid reserve use.
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Total News Sources32
Leaning Left3Leaning Right8Center10Last UpdatedBias Distribution48% Center
Bias Distribution
- 48% of the sources are Center
48% Center
14%
C 48%
R 38%
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