“After four years of projected deficits and a cumulative total of $125 billion in budget problems solved so far, the state’s negative fiscal situation is now chronic,” said legislative analyst Gabe Petek.
“The state’s negative fiscal situation is now chronic.”
Those are the words of legislative analyst Gabe Petek, who recently published a comprehensive analysis of California Governor Gavin Newsom’s 2026-2027 budget. In the report, Petek sounded the alarm on the Golden State’s financial health, which is characterized by “four years of projected deficits and a cumulative total of $125 billion in budget problems.”
Indeed, for the first time in California’s modern history, the state is looking at four consecutive projected budget deficits—nearly half a decade of government spending outstripping its own revenues.
Around this time last year, the Governor’s Office falsely predicted that California could expect to see a budget surplus in 2025. When it came time for the May revision, they found instead a $12 billion budget shortfall. Shirking responsibility for his wildly incorrect predictions, Governor Newsom blamed then newly-elected President Trump, citing the administration’s efforts to enact tariffs on foreign goods.
Analysts were quick to point out that Trump’s policies were not in effect long enough to affect California’s revenues and do nothing to account for the state’s out-of-control spending. To attribute California’s financial position to Trump’s policies—and not the over $4 billion in new, discretionary General Fund spending that year—was a fallacy bordering on hilarity.
By that logic, do the 2025 tariffs also explain California’s deficit in both 2024 and 2023?
And, for what it’s worth, most states actually experienced surpluses in the months following the tariff rollouts. The most honest assessment is that tariffs did not have any meaningful correlation—positive or negative—on states’ ability to stay within their own spending budgets.
Fiscal responsibility, which California lacks, very much did. And always does, as evidenced by Schedule 6 of the latest budget.
This section includes a chart detailing California’s spending, population, employees, and more going back to 1975. CalMatters’ Dan Walters noticed an interesting correlation across all eight budgets that Newsom has overseen: that “revenues have increased by 60%, mostly from taxes that tapped into a 48% increase in Californians’ personal income during the period. Total spending, however, jumped 72%, from $203 billion to $349 billion.”
“In other words, revenues have increased at roughly twice the rate of inflation while spending has jumped even higher,” said Walters.
Walters points out that last year wasn’t the first time Newsom was wrong to boast about California’s fiscal health. In the 2022-23 fiscal year, Newsom unveiled a budget showing a surplus of $300 billion. Looking back on the actuals, this amount is nothing short of comical. Nevertheless, it was used by Newsom and Democrats as justification to ramp up government spending to $200 billion—for the first time in the state’s history.
“No other state in American history has ever experienced a surplus as large as this,” Newsom boasted at the time.
In reality, he was a bit off. Specifically, $165 billion off.
But that isn’t a mistake Californians can just write off and move on from. Every year the state fails to rein in a structural deficit, it carries over into the future until the government can either seriously curtail spending, increase revenues, or—ideally—do both until the gap has been closed.
Newsom and his allies’ refusal to make that happen is why Californians are stuck with a rolling debt of $125 billion with no end in sight.
It’s difficult work, to be sure. In theory, it would be much easier to “hide” how bad the numbers are through expense deferrals, borrowing federal funds, and other forms of “account gimmickery.” It would appear that Newsom is trying just about every trick under the sun, including delaying $1.9 billion in education payments and borrowing $3.44 billion to pay for California’s statewide Medicaid program.
As an evergreen reminder, that latter amount—the maximum which California could legally borrow—does not even cover half of the $8.4 billion it spent covering health care expenses just for illegal immigrants, let alone all eligible residents.
But no amount of creative trickery can make the debt go away—only obfuscate how deeply it cuts into the state’s financial well-being. There’s little doubt that if Newsom does not reverse California’s fate—and soon—it will prove to be his proverbial Sword of Damocles, ever-looming over his head and threatening his viability for higher office.
“Newsom clearly envisions a presidential campaign after his governorship ends, but the self-inflicted budget mess may haunt him,” said Walters.
