Why Newsom is facing an $18 billion deficit
CalMatters••nation
Key Points:
- California's fiscal outlook has shifted dramatically from a projected $363 million surplus in early 2025-26 to a $12 billion deficit by May, driven by wildfire disaster costs, increased Medi-Cal expenses, and federal policy uncertainties.
- Governor Newsom's budget response included internal borrowing, dipping into reserves, and freezing Medi-Cal enrollment for undocumented immigrants to avoid deep cuts to other social services.
- The state's heavy reliance on taxing high earners tied to volatile stock market gains contributes to fiscal instability, with a recent swing from a $100 billion surplus in 2022 to a projected $56 billion deficit over two years.
- The Legislative Analyst’s Office forecasts the deficit could grow to nearly $18 billion in 2026 and a structural deficit of
