California Projected To Face $18B Deficit As Newsom Heads Into His Last Year As Governor

CBS Los Angeles

November 20, 2025

California is projected to face a $18 billion deficit next year, setting up a challenge for Gov. Gavin Newsom to safeguard some of the progressive policies that have defined his tenure as he considers a presidential run.

The nonpartisan Legislative Analyst's Office projected the shortfall in a report released Wednesday. It would mark the state's fourth deficit in a row, including last year's $12 billion shortfall. State spending continues to grow much faster than revenues, and new federal policy changes to health care and food assistance programs for low-income people will also increase costs for the state by $1.3 billion, the report says.

Newsom will release his own budget estimates in January as he lays out a spending proposal for the next fiscal year; sometimes his office disagrees with the LAO and paints a rosier financial picture. His second and final term as governor ends in January 2027, and this year's budget will be his last say on how money is spent in the nation's most populous state. Governors in California are limited to two terms.

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