Gavin Newsom touted California’s roaring economy while also preaching fiscal prudence as he unveiled his final budget as governor Thursday — the largest in state history.
The governor’s revised 2026-27 budget proposes $349.9 billion in total spending and $246.6 billion from the general fund — the highest total spending level of Newsom’s governorship and a nearly $150 billion increase from the budget he inherited in 2019.
The governor’s critics were quick to seize on this point, accusing Newsom of living in a “fantasyland” and using mathematical magic for his final budget, as huge upticks in spending suggest a rosier picture than many expected — just before he walks out the door (and likely runs for president).
An ominous report last month by California legislative analysts predicted the state’s excessive spending could lead to structural deficits as high as $30 billion a year.
State Sen. Roger Niello, vice chair of the Senate Budget Committee, told The Post that Newsom’s presentation was “a magic show full of tricks to fool the people.”
“It was a little bit frustrating to me that I had to listen to him talking about the federal government and president Trump for an hour before he even started talking about our state budget,” Niello said.
“He can complain about that all he wants, but the problem is the structural deficit that we have was created by the Newsom administration.”
Much of the actual spending growth in Newsom’s budget is concentrated in families, with an emphasis on schools, healthcare and social programs — areas that have exploded in cost over the last several years.
The governor’s plan includes roughly $151.6 billion for TK-12 programs, including about $91.3 billion from the general fund. That marks a dramatic increase from prior years, when total TK-12 spending stood at roughly $80.4 billion in 2023-24.
The administration says total per-pupil spending will now reach roughly $28,282, while Proposition 98 funding alone — which establishes a floor on state spending — would provide about $21,013 per student. The budget also includes a 4.31% “super” cost of living adjustments for schools and community colleges, roughly 1.5 times larger than legally required.
“This year, we’re going to announce the largest investment in special education in California’s history. I don’t know that many other states can lay claim to this kind of investment,” Newsom said.
The governor is proposing nearly $2.4 billion in additional special education funding — a 43% increase in a single year — and 14 weeks of paid pregnancy leave for TK-12 and community college employees, as well as another $428.8 million for literacy coaches and reading specialists through 2031.
State spending on health and human services in Newsom’s revised budget rose to $90.4 billion from the general fund, an increase of almost $3 billion. State officials blamed cuts made by federal legislation from Trump and House Republicans.
California brought in $16.5 billion more in tax revenues than expected since January, largely because of capital gains tied to the stock market and the state’s booming AI economy. Newsom suggested these gains came in spite of Trump’s economic policies, from blocking legal immigration to levying illegal tariffs.
“We have a president who doesn’t give a damn about the economy,” Newsom said.
The governor’s opponents in the California Legislature have leveled the same accusations.
The state Legislative Analyst’s Office has reported that eliminating all discretionary spending expansions adopted since Newsom became governor would save about $15 billion — just half of the potential annual shortfalls.
Newsom used his budget presentation to repeatedly boast that California’s economy has “no peers,” pointing to the state’s $5.4 trillion economy, dominance in venture capital and tech, and growth rates that he claimed outpaced China, Germany and the United States overall.
“With respect to those with California derangement syndrome,” Newsom said in a nod to his political foe President Trump, “it’s time to update your talking points.”
However, Newsom also acknowledged that California needs to prepare for potentially hard times.
“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.”
CalMatters reported that Newsom has proposed drawing down $7 billion in reserves this fiscal year while depositing $3.6 billion to a rainy day fund next year. The governor’s budget summary notes $9.7 billion will be put into the state’s new Surplus Holding Account next year to help stabilize future budgets and reduce structural deficits.
State Sen. Tony Strickland (R-Huntington Beach) cast serious doubt on Newsom’s budget, saying the governor has a “history of living in Fantasyland.”
“I’m waiting for the real numbers from the respected, nonpartisan Legislative Analyst’s Office because their data is based on facts and fiscal reality,” Strickland said in a statement.
“The governor’s numbers are as unreliable as the high-speed rail project.”
Assemblyman David Tangipa, vice chair of the Assembly Budget Committee, called the budget “deeply concerning” as it puts California at risk of insolvency is spending remains at this level in the face of an economic downturn.
“This budget reflects a pattern of deferred decision-making — kicking structural problems down the road for the next governor and legislature to inherit,” Tangipa said.
“Governor Newsom appears to define fiscal success narrowly: If the budget doesn’t collapse on his watch, it’s a balanced one. This boom-and-bust approach to budgeting is simply not sustainable.”
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