Gov. Gavin Newsom says his last budget is fiscally sound. Some see trouble ahead
During the presentation for his final budget proposal, Gov. Gavin Newsom said leaving a $0 deficit for the next few years was in the “spirit” of his predecessor, Jerry Brown, who left him an $8.9 billion surplus and a bolstered rainy day fund.
“I think it’s deeply part of his legacy, and I wanted to continue,” he said.
Senate budget leader Roger Niello, R-Fair Oaks, disagrees with the self-assessment, saying after the presentation that Newsom’s legacy “certainly won’t be as good as Governor Brown’s.”
“When the governor leaves office, he will be leaving the next governor ongoing structural deficits from 2028 on— the next governor and the rest of we Californians. I don’t think that’s a very good legacy,” he said.
Others, too, have expressed concern that the May Revision leaves them in the lurch — especially counties and immigrant rights advocates, who say Newsom’s balanced budget kicks additional costs to local government and adds more cost pressures for certain immigrants.
Unsustainable revenues balance budget, pressures remain
The state’s deficit, which shrank from an estimated $2.9 billion in January to $0 for the next few years, was eliminated in part due to high tax collections this year, driven by enthusiasm around artificial intelligence. Newsom touted during his presentation that revenues had come in $53.6 billion higher than what the Legislative Analyst’s Office had estimated in November. However, all parties, including the governor, have acknowledged that the funding from AI revenues is not sustainable.
Niello said Newsom and Democratic leaders should have done more these past few years to study where spending isn’t paying off for the state and made cuts there.
“This stock market looks a lot like the dot-com crash of 25 years ago,” he said. “Stock markets never go up forever. And the further they go up in terms of inflated values, the harder the fall. And I’m very concerned.”
Meanwhile, the California State Association of Counties, which represents the state’s 58 county governments, say Newsom’s administration has only funded a sliver of their $1.9 billion ask when it comes to assistance with the changes wrought by the Trump Administration’s “One Big Beautiful Bill Act,” or H.R. 1.
The governor has committed to give counties $262 million in one-time funds to support the additional workload mandated by the H.R. 1 changes. CSAC estimated that counties would need $600 million annually for the additional administrative duties.
“There is not funding for hospitals, there is not funding for indigent care, there is not even remotely close to sufficient funding for the eligibility work that is needed to keep people on Medi-Cal,” said CSAC CEO Graham Knaus.
Newsom’s budget proposal does include some additional funding for counties, a new proposed tax of digital prewritten software and software as a service, which he said would increase local sales tax revenue by $560 million in 2026-27 and increase to $1.1 billion annually. Knaus said that sales tax revenue is split between cities and counties, and is offset by counties needing to take on more of the responsibility of paying for the In Home Supportive-Services program.
There is also $50 million in the latest proposal for “hospitals in immediate and significant financial distress,” an amount that California Hospital Association called “a strong starting point.”
During his presentation Thursday, Newsom said the state had provided a number of supports for counties, and later said he had had to get creative with budget challenges during his time as mayor of San Francisco.
“To the extent that this will require them to do things differently, the next few years of the Trump administration, we all are going to have to do things differently,” he said of county leaders.
Immigrant rights advocates raised concerns with changes to the Medi-Cal program for adults with unsatisfactory immigration status, especially after the state Senate forecast in its plan that additional cost burdens wouldn’t be necessary, and that some could be delayed.
“The governor’s budget continues devastatingly cruel cuts to healthcare for the most vulnerable immigrant communities that were proposed in January — and have already been firmly rejected by the state Senate,” said Kiran Savage-Sangwan, executive director of the California Pan-Ethnic Health Network, “In light of the state’s surge of revenues, continuing to advance these brutal cuts, despite a nine-month delay, is further evidence that they aren’t a matter of math but a matter of values.”
The May Revision is the jumping off point for negotiations that will continue until the budget is passed in mid-June.
This story was originally published May 14, 2026 at 4:42 PM with the headline "Gov. Gavin Newsom says his last budget is fiscally sound. Some see trouble ahead."
