By Yue Stella Yu, CalMatters
Governor Gavin Newsom recently presented a budget with a projected “modest shortfall” of $2.9 billion for the upcoming year. This is significantly lower than earlier estimates and is part of a $349 billion budget largely tied to profits from tech and AI sectors.
The 2026-27 budget predicts an additional $9 billion in revenue, banking on continued growth in California’s AI economy, a claim not fully supported by experts. The nonpartisan Legislative Analyst’s Office is less optimistic, suggesting an $18 billion deficit.
Joe Stephenshaw, the state Department of Finance Director, pointed out that a market downturn poses a major risk. Newsom’s plan calls for nearly $30 billion more in spending compared to the last budget. This includes $248.3 billion for state operations, up $18 billion from the previous year.
This increase in funding aims to address federal cuts to the Medi-Cal program and to fulfill legal obligations to invest in education. The University of California will see an added $350 million, while California State University is set to receive $365 million to support a previous commitment to raise their budgets annually.
Despite the challenges, there are no cuts planned for K-12 education. Funding per student could increase slightly to $27,400, and special education will see a boost of $509 million. Newsom’s budget avoids cuts to various educational initiatives, such as after-school programs.
Negotiations over the budget will intensify starting in June, as the projected deficit for 2027-28 could reach $22 billion. Newsom’s plan also proposes depositing $3 billion into the state’s rainy day fund, along with significant contributions toward pension liabilities to ensure fiscal responsibility.
While Newsom highlighted positive revenue trends, he avoided addressing the potential need for cuts to essential services. His new proposals include fully funding universal transitional kindergarten, costing $1.9 billion annually, and increasing funding for community schools and mental health initiatives.
However, local government officials expressed concern over inadequate funding to manage the impacts of federal cuts. Graham Knaus of the California State Association of Counties warned that this could jeopardize community services, leading to negative consequences across the state.
Senate Budget Committee Chair John Laird has voiced skepticism about sustaining the anticipated revenue growth. He likened the situation to past economic bubbles and stressed the importance of addressing the long-term structural deficit before it escalates.
This year’s budget also tightens spending on housing and homelessness. After increasing housing funds over the previous years, Newsom’s latest proposal reduces assistance from $1 billion to $500 million, designed to ensure accountability among local governments.
Advocates for housing expressed disappointment and emphasized that the reduction in funding could threaten progress in tackling homelessness. Conversations with the Legislature may lead to adjustments before the budget is finalized.
Regarding healthcare, the proposed budget adds $2 billion for Medi-Cal, responding to federal cuts. This challenge may impact over 1.8 million Californians’ access to healthcare. Assemblymember Mia Bonta is advocating for exploring new funding sources to avoid worsening the situation.
As discussions continue, lawmakers will need to balance innovative programs with fiscal responsibility to ensure California meets the needs of its residents.
For more insights on state budget matters, visit CalMatters.
Source link
California Budget,Donald Trump,education,Gavin Newsom
