(The Center Square) – Gov. Gavin Newsom highlighted some of the 2025-26 state budget lines Monday afternoon while visiting the Northern San Joaquin Valley as a part of his California Jobs First tour.
While touting a proposed balanced budget, Newsom emphasized the possibility of “the bottom falling out” due to policies imposed by the new Trump administration. Additionally, Newsom said that the initial budget that will be fully outlined on Friday will not be the same budget that goes into effect in May.
“May will reflect a very different mindset, a different understanding and a different budget,” Newsom said. “In May, this (the budget) may need to increase as it relates to the uncertainties of the federal administration,” noting potential tariff and immigration policies that could affect California’s economy.
Newsom’s proposal shows a $322.2 billion balanced budget with no deficits with a $228.9 billion general fund. Additionally, there are $16.9 billion in total reserves with $10.9 billion being put in a rainy day fund, $1.5 billion in a public school rainy day fund and $4.5 billion in a special fund for economic uncertainties. The budget also projects $16.5 billion in additional revenue.
Newsom also hinted towards a “moderate surplus,” but refused to give specifics, saying that it will be further discussed during Friday’s budget presentation. This proposed budget is an increase of about $25 billion from the 2024-25 fiscal year.
“It includes savings from the elimination of 6,500 government positions, resulting in $1.2 billion in savings over two years, alongside operational efficiencies like reduced travel budgets, printing costs, and IT modernizations that further reduce costs by $3.5 billion,” reads a press release from the governor’s office.
While this proposed budget contains no deficits, the Legislative Analyst’s Office has predicted budget deficits in the coming years and the state remains burdened with a half a trillion dollar pension debt in the California Public Employees Retirement System. While Newsom has budgeted $2.4 billion in payments for the 2025-26 year, there is still $9.8 billion owed over the next four years.
Additionally, California is facing a mountain of unemployment insurance debt to the federal government with no plan to pay back the roughly $20 billion.
Nearly $119 billion of the budget will be put towards education with per-pupil expenditures reaching almost $25,000 – a $10,000 increase over the past decade. This funding includes initiatives that have been debated over the past year with $4.4 billion going towards before and after school programs, $2.4 billion for universal transitional kindergarten, $2 billion for universal school meals, $1 billion to guarantee art and music funding and $311 million for equity multiplication.
Newsom also spoke for the removal of Propositions 2 and 4, saying that they make it impossible to bank extra money during good years to have for less prosperous years.
The full budget release and briefing will take place Jan. 10 and will be led by the Department of Finance.
