California‘s nonpartisan Legislative Analyst’s Office released its fiscal outlook for the 2026-2027 budget cycle, forecasting an $18 billion deficit that Gov. Gavin Newsom (D-CA) and the legislature’s Democratic super-majority will have to balance by June 15. This is the fourth year in a row California has posted a multibillion-dollar budget shortfall, and the LAO predicted next year’s deficit will double in size to $35 billion.
California’s persistent deficits are not caused by a lack of revenue. In fact, tax revenues came in $6 billion higher than expected just months ago. Although the LAO report warns that this boost in revenue, even though it is not enough to balance the budget, is unlikely to last. “Most of these gains come from the meteoric rise in the value of a handful of tech companies that investors believe will be major beneficiaries of recent advances in [artificial intelligence],” the report warns. “Recent income tax gains are tied to an unsustainable stock market,” predicting that “a market downturn is only a risk but not a certainty.”
If California tax revenue is growing faster than expected, thanks to the artificial intelligence bubble, then the deficits can only be blamed on even faster growth in spending. And that is exactly what has happened under Newsom’s leadership.
Every aspect of state government has grown under Newsom, especially his personal staff. When Newsom was first sworn in, the governor’s office employed just 150 people. Now it has 381 people on the payroll, all serving Newsom’s every whim.
Newsom created a brand new “Office of Community Partnerships and Strategic Communications,” with more than two dozen staff tasked with promoting the governor’s signature initiatives, and California’s first “State Chief Equity Officer,” who is charged with ensuring every state agency integrates diversity, equity, and inclusion in its operations, hiring practices, procurement, and service delivery.
But Newsom’s biggest spending increases have come in K-12 education, healthcare, and housing. All told, spending has grown by over two-thirds in these categories since Newsom came to office. But what is most alarming is how little he has accomplished in his big spending spree. Despite pouring billions of dollars into higher government union teachers’ salaries, California K-12 test scores have not improved and, in fact, have declined compared to other states, particularly red states, such as Florida, Mississippi, and Texas.
Newsom’s billions of dollars spent on housing have done nothing to make housing more affordable. California still has the most expensive housing in the nation, housing starts are still far below other states, and California still has the nation’s highest homeless population.
In past years, Newsom and his legislative lackeys have avoided spending cuts by borrowing from special funds, dipping into state reserves, and delaying pension payments. But they are running out of these temporary, one-time solutions.
THE DEMOCRATS’ RECKLESS CALL FOR MILITARY DISOBEDIENCE
Newsom will undoubtedly try to blame President Donald Trump for his state’s budgetary woes, and it is true that the administration’s “one big, beautiful bill” did end many of the loopholes California was using to game the federal government’s Medicaid system. But the LAO report shows that ending this waste, fraud, and abuse accounts for just $1.3 billion of the state’s $18 billion fiscal hole.
The endgame for Newsom and California Democrats is clear. Hope the AI bubble does not burst before 2028, beg, borrow, and steal from whatever special funds and reserves the state has left to survive until then, hope Newsom becomes the next president of the United States, and then open the flood gates of federal taxpayer bailouts for Newsom’s unending spending spree.