Overview

• Governor Gavin Newsom's revised budget forecasts a $12 billion deficit for California in 2025, citing federal tariffs and unanticipated Medi-Cal costs as primary factors.
• Newsom's administration has faced criticism for repeated revenue forecasting errors over the past six years, undermining trust in state financial projections.
• A one-time revenue spike in 2019-2022 led to overly optimistic budget assumptions, resulting in a cumulative $165.1 billion forecasting error and new spending commitments based on phantom revenues.
• The expansion of Medi-Cal, including coverage for undocumented residents, has exceeded cost estimates by $6 billion, further straining the state's fiscal outlook.
• The Legislative Analyst’s Office warns that California's structural deficit, currently estimated at $10–$30 billion annually, could grow to $42 billion by 2028-29 if unaddressed.