California’s budget watchdog is warning state leaders they don’t have extra money to spend as Gov. Gavin Newsom (D.) prepares an "emergency" legislative session to approve more funding for lawsuits combating the incoming Trump administration.
A budget analysis from the California Legislative Analyst’s Office found that while the budget shortfall is just $2 billion—compared with last year’s $68 billion deficit—the state has engaged in "atypically high spending growth" that leaves no room for new programs without cuts, tax hikes, or other budget measures. The office projected that the shortfall would swell to $20 billion by 2026 and to $30 billion the following year.
"There is really no capacity for new commitments because we do estimate there to be pretty significant operating deficits in subsequent years," legislative analyst Gabriel Petek said.
This caution comes less than two weeks before state lawmakers return to the capitol for the special session Newsom called in hopes that the legislature will pass new funding for the California Department of Justice and other state agencies to stymie President-elect Donald Trump’s policies surrounding topics like abortion and the environment.
"California has a $2 billion deficit that’s projected to explode in the next few years, and Newsom’s solution is to spend another $100 million on lawyers to fight President Trump," said the California state assembly’s Republican leader, James Gallagher. "These ‘resistance’ stunts cost money, and thanks to Newsom’s incompetent budgeting, California doesn’t have any."
The official who wrote the latest forecast told the Washington Free Beacon in an email that the Legislative Analyst’s Office "will certainly provide our independent assessment of … costs and implications" of Newsom's plan if it’s proposed as part of his budget in January. A Newsom spokeswoman did not give a cost estimate for the governor’s special session plans but said the governor "intends to work with the president-elect wherever there is common ground."
Newsom has struggled with the budget since federal COVID-era funding ran out. In 2022, he blew through a nearly $100 billion budget surplus largely by pouring money into one-off programs spanning homelessness, mental health, and climate.
The state budget has also ballooned since Newsom took office in 2019. His predecessor, Gov. Jerry Brown (D.), passed a $201 billion budget in his final year in office. By 2021, Newsom increased it by 34 percent to $269 billion. In 2022, when nearly one million Californians had moved out of the state and shrunk the population, Newsom enacted a nearly $308 billion budget.
California’s Democratic lawmakers met the budget news with promises to trim. Assembly Speaker Robert Rivas said lawmakers "need to show restraint with this year’s budget" and that "it’s not a moment for expanding programs."
Meanwhile, the Newsom administration touted a recent report that tax revenues have rebounded higher than expected, raking in more than $5 billion over projections. The Legislative Analyst’s Office also reported this spike, noting it as a sign that the wealthiest Californians are benefiting from the recent stock market rally. Analysts added that the majority of workers' hourly wages and salaries rose only incrementally.
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