On January 9, the Governor formally submitted his proposed Budget to the State Legislature, and despite debate over the size of the projected shortfall, Governor Newsom announced that his Administration is expecting $42.3 million in revenue above last year’s revenue projections. As a result, the Administration proposes a Budget for the 2026-2027 fiscal year with reserves totaling $4.5 billion.
Despite the increased revenue above projections, the 2026-2027 Budget also projects a deficit of roughly $22 billion in the 2027-28 fiscal year, and shortfalls in the following years through 2030. To combat this, the Administration maintains that the proposed Budget demonstrates fiscal responsibility, builds upon State reserves and prepares the State for structural deficits in multiple consecutive budget years. The proposed Budget makes substantially less investments in new programs and initiatives across the State government, particularly in climate and natural resources.
When previewing his proposal, the Governor noted that his priorities included affordability across all areas, sustainability, and celebrating long-term investments into California’s water and power infrastructure that benefit local communities, including recent strides towards the completion of Sites Reservoir through expedited permitting.
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