Overview
- The projected shortfall is about $5 billion larger than the administration anticipated, with programs running roughly $6 billion over prior estimates.
- Structural deficits are forecast to widen to about $35 billion annually beginning in 2027–28 as spending outpaces revenue growth.
- Recent revenue strength is largely stock-linked and, under constitutional formulas, is mostly steered to schools and reserves rather than closing the gap.
- Costs are expected to rise for retiree health care, pension payments and prisons, and for Medi-Cal and CalFresh as federal support is reduced.
- Gov. Gavin Newsom will unveil his budget plan in early January before negotiations toward a mid-June deal, with fewer reserves available after prior draws and internal loans.