Hidden in the fine print of California’s state budget are charts that few people ever read—but they tell a damaging story about how California arrived at its current financial crisis.
Those charts, included in the proposed 2026–27 budget from Gov. Gavin Newsom, show that state spending has surged during his tenure at a pace far beyond population growth, inflation, and even revenue increases. According to both the California Department of Finance and the California Legislative Analyst’s Office, the result is a massive “structural deficit”—meaning the state permanently spends more than it takes in.
Legislative Analyst Gabe Petek warned that California now faces multiyear deficits ranging from $20 billion to $35 billion annually.
“These deficits are concerning for three reasons,” Petek wrote. First, after four straight years of shortfalls totaling about $125 billion, the problem is now chronic. Second, the structural deficit has grown worse, producing the most negative forecast since the pandemic. Third, the deficits have continued even as the economy and revenues have increased, showing the problem is structural, not cyclical.
The budget charts back up that warning and undermine claims that recent shortfalls stem mainly from wildfires, federal aid reductions, or economic turbulence.
Since Newsom’s first budget in 2019–20, state revenues have risen about 60%, driven largely by higher personal income. Total spending, however, has jumped 72%, climbing from $203 billion to roughly $349 billion.
During that same period, California’s population has remained nearly flat at about 39.6 million, while inflation has averaged around 3% per year. In real terms, spending growth has far outpaced both inflation and population change.
This expansion also shows up in government payrolls. The state workforce grew nearly 28%, from about 377,000 employees to nearly 482,000. Major cost drivers included expanded health care programs—especially for low-income residents—and constitutionally mandated increases in school funding.
Another budget chart reveals how the crisis began.
In 2021, as California rebounded from COVID shutdowns and absorbed billions in federal relief, general fund revenues surged 53% above pre-pandemic levels and exceeded $200 billion for the first time. Newsom and his budget team treated that spike as largely permanent.
That assumption fueled Newsom’s claim during the 2022–23 budget process that California had a $97.5 billion surplus—“the largest surplus any state has ever had,” he boasted. Lawmakers responded with a massive spending expansion.
But the revenue boom proved temporary. The administration later admitted it had overestimated revenues by $165 billion over four years. The structural deficit that followed has now totaled roughly $125 billion.
Rather than a one-time setback, California’s budget imbalance is now built into the system. Even with economic growth, revenues cannot support the level of spending Newsom and the Legislature approved.
Newsom has been widely mentioned as a future presidential contender, but the fiscal legacy of chronic deficits may follow him onto the national stage—an enduring reminder that California’s budget crisis was not caused by recession or disaster alone, but by policy choices made during years of apparent abundance.
