Particle.news
Download on the App Store
7 ARTICLES
·
4w ago

Newsom’s May Budget Balances Near Term but Leaves a Large Structural Shortfall

The Legislative Analyst’s Office says the plan depends on one-time reserve actions and volatile capital‑gains and AI‑linked revenues that raise the risk of a future revenue shock.

Image
California Governor Gavin Newsom in a blue suit and tie walks through the halls of the U.S. Capitol, with a woman in a red pantsuit and security personnel.
Governor Gavin Newsom speaking at a podium with his arms outstretched.
Image

Overview

  • Gov. Gavin Newsom released a revised May budget that the administration says balances spending through 2028 by using higher-than-expected tax receipts and temporary moves.
  • The nonpartisan Legislative Analyst’s Office told lawmakers in mid-May that the plan relies on about $20 billion in reserve withdrawals and suspended deposits and on $4 billion in new borrowing.
  • Using its own revenue forecast the LAO calculated an adjusted operating shortfall of about $16.9 billion and said the administration’s numbers still imply roughly $10 billion in annual out‑year deficits.
  • Analysts and outlets note that much of the revenue gain comes from capital gains and equity tied to the AI boom, creating a concentration of tax receipts that could reverse if markets fall and force deep cuts or tax increases.
  • Lawmakers are negotiating priorities such as Prop. 36, healthcare and local projects while deciding whether to bolster reserves, cut ongoing commitments, or raise recurring revenue before the June budget deadline.