(The Center Square) – Amid concerns that there might be as large as an $18 billion budget deficit in the coming year, California lawmakers started writing the state’s budget with the help of finance officials.
The California Assembly Budget Committee Tuesday heard the concerns of officials from the state’s Finance Department and Legislative Analyst’s Office, which issued its budget report in November 2025. That report detailed an $18 billion budget deficit, according to previous reporting by The Center Square.
“Our budget process must be guided by our twin goals: compassion and fiscal responsibility,” Assemblymember Jesse Gabriel, D-Encino and chair of the Assembly Budget Committee, said during the panel’s meeting on Tuesday. “We know we cannot balance the budget on the backs of the poor and our most vulnerable communities. But we also refuse to ignore the real fiscal challenges facing our state as well as the potential risks from outside economic factors.”
The new year is the third straight year the state has faced big budget woes, according to lawmakers who spoke during Tuesday’s budget committee meeting. Among some of the biggest challenges the committee faces in crafting a budget is finding the money to pay for Medi-Cal and CalFresh, two federally-funded programs that have seen deep cuts in the current federal budget under the One Big Beautiful Bill Act.
Medi-Cal, California’s version of the federal Medicaid program, will see $1.1 billion in additional expenditures to backfill the federal government’s funding gap, according to the governor’s budget proposal. That budget also highlights how the state will carry the cost of the federal government’s roughly $300 million cut to CalFresh, which provides food stamps to low-income Californians.
Those challenges, in addition to the ongoing budget deficits that both the Legislative Analyst’s Office and the governor’s office projected in recent weeks, should be concerning to lawmakers, according to Republican legislators on the committee.
“When the administration’s own experts are raising red flags, the Legislature has a responsibility to ask tough questions and demand fiscal accountability,” Assemblymember David Tangipa, R-Fresno and vice chair of the Assembly Budget Committee, said during the committee meeting on Tuesday. “Californians can’t afford budgets built on wishful thinking or short-term fixes that push costs onto future taxpayers.”
A key issue talked about among the state’s finance officials Tuesday included the yawning gap between the governor’s budget proposal and the Legislative Analyst’s Office’s budget outlook released in November. While the earlier Legislative Analyst’s Office report projected an $18 billion budget shortfall, the governor, anticipating a stronger economy and rising Big Tech company valuations, projected a much smaller $2.9 billion budget deficit. The Legislative Analyst’s Office last week called the governor’s budget proposal “alarming” because of the anticipated budget shortfalls the governor’s office anticipated in the coming years, according to an assessment of the governor’s budget proposal.
“That $15 billion delta, the main explanation for it is that the administration’s revenue estimates are $30 billion higher than our estimates through the budget year,” Gabriel Petek, the California legislative analyst, testified during the budget committee meeting.
Among other funding priorities, the governor’s proposed budget called for an allocation of $39.1 billion for climate change resilience, more than $10 million in health and human services programs, which includes Medi-Cal, and $7.5 million for child care services administered by the state’s Department of Social Services.
“This is the beginning of the whole process, and we’re going to have a lot of opportunities to discuss this budget proposal,” Erika Li, chief deputy director of budgets for the California Department of Finance, testified during the budget committee. “The two north stars of being compassionate and making sure we’re not hurting vulnerable populations must be balanced with the actual fiscal realities.”
The Assembly Budget Committee is expected to have roughly 60 budget hearings between now and May, according to lawmakers who spoke about the process during the meeting on Tuesday. The governor’s budget will then go through a series of changes before the widely anticipated May revision is released. The Legislature will then finalize the state’s budget before it is passed and signed into law by the governor.
