Reports from the U.S. Bureau of Economic Analysis and California Department of Finance

California Governor Gavin Newsom Proposes $322 Billion Budget for 2025-26 Amid Trump Administration Uncertainty

Jan 6, 2025, 08:30 PM

California Governor Gavin Newsom has proposed a $322 billion state budget for the fiscal year 2025-26, marking a shift from the previous two years of budget shortfalls. The proposed budget does not project a deficit, a change attributed to good planning in the previous budget cycle. Newsom highlighted that the state's tax revenues this year are $16.5 billion above projections, largely due to a booming stock market and income growth among high-income Californians. The budget proposal includes the full implementation of the state's universal transitional kindergarten program, which will provide free education to approximately 400,000 four-year-olds. Newsom's budget is described as a placeholder, pending potential changes in federal funding under the incoming Trump administration, which could impact California's budget significantly given that about a third of its funding comes from the federal government. The state is also preparing to allocate $25 million to Attorney General Rob Bonta's office to address potential legal challenges from the Trump administration, particularly concerning climate policy and immigrant rights. Newsom has proposed little new spending, and California's economy, the fifth largest in the world, continues to navigate a sluggish economy with limited job growth and weak consumer spending.