Economy

California’s budget outlook improves, but future deficits loom

The Legislative Analyst’s Office released on Wednesday its budget outlook for Fiscal Year 2026.
California Gov. Gavin Newsom discusses his proposed state budget for the 2024-2025 fiscal year, during a news conference in Sacramento, Calif., Wednesday, Jan. 10, 2024. (AP Photo/Rich Pedroncelli)

California’s budget is “roughly balanced” headed into next year, a new analysis finds, thanks to lawmakers’ work to close a yawning budget gap last session and a stock market rally driven by excitement about artificial intelligence.

But the good news ends there. Sizable deficits forecast for future years leave state leaders with very little wiggle room to fund new programs next year, even as they brace for potential federal funding cuts and conflict with the incoming Trump administration.

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