“Try fixing [California’s budget] before selling yourself to the rest of the country,” the CA Republican Assembly Instagram account said of Governor Gavin Newsom.
For the third year in a row, California faces major budget problems in the form of a staggering shortfall. While Governor Gavin Newsom’s usual critics rarely shy away from pointing this out, the influx of nonpartisan sources now sounding the alarm means that the Golden State’s financial woes are getting considerably harder to ignore.
“Most of the reason that the state faces a budget problem is that the underlying costs of state services continue to outpace the state’s revenue collections,” reads a recent report by the California Legislature’s Nonpartisan Fiscal Policy Advisor, or Legislative Analyst’s Office (LAO).
That about summarizes the classical definition of a deficit. But that’s not what makes this notable. What’s unique about this year’s budget problems is that it has “required the state to adopt more ongoing solutions” to try and address over $4 billion in new, discretionary General Fund spending.
Perhaps it’s worth recounting how we got here. In January 2025, Governor Gavin Newsom announced his proposed $322.2 billion budget for 2025-26 would be balanced with no deficit (in fact, they predicted a $363 million surplus, which was embarrassingly off-base. Several months later, around the release of the May Revision, Newsom sheepishly admitted that there would, in fact, be a $12 billion deficit. Now, in October 2025, it’s looking closer to $15 billion in light of a “new wall of debt,” now totaling $21.6 billion—the product of fiscal missteps by Newsom’s administration, insiders allege.
In a recent Instagram post, the California Republican Assembly’s official account claimed that Newsom “hid $3.4 billion in Medi-Cal costs and shorted schools $1.9 billion to fake a balanced budget.”
This is in reference to an announcement by California Department of Health Care Services earlier this year, which revealed that the state needed to borrow $3.44 billion to maintain its Medi-Cal program—a number which exploded amid coverage for undocumented immigrants and higher pharmaceutical costs. A follow-up request asked the Legislature for an additional $2.8 billion just weeks later. That’s a total of $6.2 million.
Meanwhile, Democrats like Senate Minority Leader Chuck Schumer insisted that “NOT. ONE. PENNY.” of federal tax dollars funding Medicaid for illegal immigrants. But that’s not entirely true.
Through the use of “emergency” Medicaid—which exists, in theory, to provide uninsured patients with care in the event of an emergency—states can and do use this as a loophole to extend Medicaid to undocumented migrants. California is responsible for nearly three-fourths of the proverbial damage.
“There are numerous other ways in which states provide Medicaid benefits to illegal immigrants. Many are deemed to be “lawfully residing” in the United States, despite their undocumented status—and thus qualify for the program. Others have been granted qualified alien status by states, which also opens the door to federal Medicaid funding,” wrote Pacific Research Institute President and CEO Sally Pipes in a recent Washington Examiner piece.
Democrats keep changing their tune. At first, they proudly championed that it was happening—finally—at their behest. Now, some insist it’s not happening—anyone insinuating otherwise is perpetuating “Republican lies.” At first, Newsom and California’s Latino Caucus said that walking back health care for illegal immigrants was “not on [the] docket.” Now, both have supported gutting those protections to cut down on the deficit. The latest was a proposal by Newsom to scale back adult undocumented-immigrant enrollment starting in 2026 and introducing a $100 monthly premium for that group.
So it’s real; but it’s not real; and it’s going away; but it’s not going anywhere.
Make no mistake: it’s real, and American taxpayers—especially those living in California—are paying for it.
California Republicans have also accused Newsom of “shorting schools $1.9 billion to fake a balanced budget.” Is there any truth to this claim?
Indeed, the state budget approved in June contained the curious provision to delay $1.9 billion in education payments into the next fiscal year, plus dip into $405 million from the Proposition 98 rainy day fund set to expire in 2025-2026. This is inherently not a long-term solution to the state’s overspending problem. It’s also the textbook definition of expense deferral.
In the private sector, that would look like a company holding off on paying its bills so the balance sheet appears cleaner when investors are watching. The problem, of course, is that those bills still come due, just later, and the people left waiting aren’t shareholders, but California’s students and teachers.
Is it legal? Certainly. Is it ethical? That is certainly more ambiguous.
All the while, California Democrats continue to insist that the state’s poor financial position is because of Donald Trump.
“As we confront Donald Trump’s economic sabotage, this budget agreement proves California won’t just hold the line—we’ll go even further. It’s balanced, it maintains substantial reserves, and it’s focused on supporting Californians—slashing red tape and catapulting housing and infrastructure development, preserving essential healthcare services, funds universal pre-K, and cuts taxes for veterans,” read the official 2025-2026 state budget.
That was, of course, written before the true extent of California’s staggering shortfall was known.
“Trump, however, had nothing to do with what state officials have described as a ‘structural deficit,’ meaning that spending encased in current law outstrips revenue expectations. Rather, it stems from what officialdom later acknowledged as a $165 billion error in revenue projections in 2022 that fueled Newsom’s boast of having a $97.5 billion surplus. That, in turn, resulted in a sharp increase in spending,” wrote prolific columnist Dan Walters.
“When the surplus was exposed as a phantom, the state was stuck with a chronic income/outgo gap that persists. To cover it this year, Newsom and legislators tapped emergency reserves, borrowed money from the state treasury’s special funds, postponed some spending and engaged in some accounting gimmickry,” Walters continued.
Of course, all of this is exacerbated by the notion that Newsom is seen not only as California’s governor, but as a national figure—a top Democrat contender—with presidential ambitions. It’s often said that California is a trendsetter in national policy. What happens here tends to echo elsewhere.
“Try fixing [California’s budget] before selling yourself to the rest of the country,” the CA Republican Assembly quipped.
