Gov. Gavin Newsom unveiled his revised 2026-27 budget proposal at the Capitol Annex Swing Space in Sacramento on May 14, 2026. The proposal includes a nearly $350 billion spending plan that would balance the budget for two years and cut longer-term budget gaps in half. Newsom also proposed further budget cuts and expanding the state’s reserves despite a recent surge in tax revenue.
Gov. Gavin Newsom addresses the media during a press conference unveiling his revised 2026-27 budget proposal at the Capitol Annex Swing Space in Sacramento on May 14, 2026.
California tax revenue is soaring thanks to tech stocks. But Gov. Gavin Newsom is proposing more cuts, warning that the boom won’t last and Trump cuts will hit the state hard. Newsom released his last budget plan as governor on Thursday and proposed a nearly $350 billion spending plan that would balance the budget for two years and cut longer-term budget gaps in half.
Newsom had pledged not to leave his successor with a giant structural deficit. Under his plan, the state would face a $10.3 billion deficit in fiscal year 2028-29 and $9.6 billion in fiscal year 2029-30. Newsom wants the state to continue withdrawing $7 billion from reserves this year and shore up the rainy day fund by transferring $3.6 billion to the account next year and setting aside nearly $10 billion more for fiscal year 2027-28.
Newsom’s proposal does not go far enough to cut spending and dips into the reserves despite a year of strong revenue. The structural deficit would also remain beyond fiscal year 2027-28. Newsom’s presentation is an updated outlook at the state’s finances since January, when Newsom’s administration projected a surplus. Since then, tax revenue grew faster than anticipated, thanks to a robust stock market and California’s flush AI-driven technology sector.
Newsom projects that the state will see $16.5 billion more in revenue over a three-year budgeting window than expected in January. Newsom said the state’s financial outlook remains ominous, attributing much of the uncertainty to Trump’s policies. Newsom’s spending plan is in sharp contrast to what Democrats in the Legislature want.
Newsom also stuck to his proposed cuts to the state’s in-home supportive services program and rejected appeals from Senate Democrats and local governments to spend more on homelessness and on
California Budget Gov. Gavin Newsom Budget Cuts Reserves Boost Tax Revenue Stock Market AI-Driven Technology Sector Trump Cuts Budget Gap Structural Deficit California Legislature Senate Democrats Healthcare Funding Education Funding Immigrants Refugees Asylees Trafficking Survivors In-Home Supportive Services Program Homelessness Corporate Tax Credits Tax Increases Big Corporations Small Business Guy
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