Overview

• California's GDP has surpassed $4 trillion, overtaking Japan to rank as the fourth-largest economy globally, behind the U.S., China, and Germany.
• The state faces significant social challenges, including the highest poverty rate and the third-highest unemployment rate in the U.S., with over a million jobless residents.
• Governor Gavin Newsom's January budget proposal included $11 billion in temporary fixes, but deficits have widened due to unexpected Medi-Cal cost overruns exceeding $6 billion.
• Since 2019, state spending has grown by an average of 9% annually, outpacing revenue growth of 6%, creating a persistent structural budget gap.
• State leaders are preparing a revised budget for 2025-26, expected to include additional short-term measures while concerns grow over depleted reserves and fiscal resilience.