SACRAMENTO, Calif. — California’s governor presented a massive $350 billion spending blueprint Thursday that eliminates budget deficits for his remaining time in office and the following year, offering a financial plan that maintains current programs without major reductions.
The governor aims to protect initiatives that have characterized his leadership of America’s largest state by population and one of the globe’s biggest economies. With potential presidential ambitions for 2028, he’s marketing the budget as financially sound because it shields California’s liberal programs while strengthening the state’s emergency reserves, responding to those who claim the state overspends. Legislative budget analysts report state expenditures have increased by over $100 billion since 2020.
“We’re cutting deficits. But we’re not cutting corners,” the governor stated.
Term limits prevent the governor from seeking reelection, and he will step down in January.
Income sources, primarily from strong stock market performance and the artificial intelligence sector, exceeded January estimates by $16.5 billion, his office reported. This windfall will help California eliminate the $2.9 billion shortfall predicted in January, ensure no budget gap next year, and reduce the subsequent year’s deficit by half, according to his administration.
This represents a positive shift for the state where income hasn’t matched expenditures. California confronted massive budget deficits for multiple consecutive years, requiring difficult reductions last year including reversing a commitment to offer free healthcare to undocumented low-income immigrants. Independent budget experts forecast the state will face shortfalls exceeding $20 billion annually in coming years.
Nevertheless, Democrats are preparing for potential federal healthcare funding reductions and the effects of rising costs for gasoline and energy due to the conflict in Iran. State officials have repeatedly emphasized California cannot replace all federal funding.
During his presentation, the governor criticized President Donald Trump and his agenda. Trump “doesn’t particularly give a damn about the financial situation of the average American,” the governor declared.
The May budget presentation will formally begin the final phase of discussions between the governor and legislative Democrats, who must approve a spending package by June’s end.
State legislators this session have introduced multiple proposals to raise corporate taxes to address budget challenges, but the governor has mostly rejected these ideas, contending such measures might drive away businesses and wealthy residents. He has instead suggested reducing fees for new small enterprises and restricting certain tax credits beginning in 2027. He opposes a ballot measure for a one-time billionaire tax likely to appear before voters in November.
California operates a progressive tax structure dependent on wealthy individuals, collecting roughly half its revenue from just 1% of residents. During economic growth, affluent taxpayers contribute more and revenues can surge rapidly. During downturns, they pay less and revenues can plummet equally fast.
The state might also benefit from anticipated initial public offerings by major AI companies, expected to be history’s largest IPOs. However, legislative budget specialists cautioned last year about a possible AI market bubble that could damage state finances.
Thursday’s proposal also features a $300 million initiative to offset lost government health subsidies, a $5 billion education program for instructor training, and $100 million to assist Los Angeles-area property owners in rebuilding following last year’s catastrophic wildfires.
