California lawmakers will face a challenging budget environment next year, marked by a projected $18 billion budget deficit, according to the state's Legislative Analyst's Office. The sobering news is amplified by a new survey revealing state residents have deep concerns about the rising cost of living.
The findings were discussed during a Tuesday event in Sacramento featuring Mark Baldassare, survey director at the Public Policy Institute of California and Legislative Analyst Gabriel Petek. The LAO is a nonpartisan fiscal advisor to the legislature.
The deficit is not merely a temporary dip, but a structural problem, said Petek, who was interviewed by Tani Cantil-Sakauye, PPIC's president and chief executive officer. Expenditures are projected to grow at a 6% rate, significantly outstripping the 4% growth expected for revenues, he said.
"We have a constitutional requirement to have a balanced budget, so we have to solve this," Petek said. He noted the higher projected costs, estimated at $16 billion, surpass $11 billion in projected revenue increases, which are largely directed to schools and state reserves under formulas set forth in the state constitution.
The LAO has urged the legislature to adopt "achievable changes in spending" and move away from one-time solutions, such as drawing down budget reserves and internal borrowing, which have already been employed. Petek also stressed the critical importance of maintaining state budget reserves to ensure California can weather future economic downturns without being forced to cut essential services.
Petek's forecast, indicating the need for budgetary belt-tightening and PPIC's survey outlining broad concerns about the economy's effect on individuals, demonstrate the challenges ahead for California Gov. Gavin Newsom and lawmakers when they craft the fiscal 2026-27 budget.
In his rundown of two recent PPIC surveys, Baldassare reported that residents see the cost of living as the most important issue facing the state today.
PPIC polled 1,676 state residents from Nov. 13-19, finding that three in four Californians expect mostly periods of higher unemployment or economic weakness in the country during the next five years.
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Despite the economic gloom, Baldassare said, the survey found overwhelming support for government intervention. Large majorities believe state and federal governments should be doing more for people in need, including extending the Affordable Care Act health insurance subsidies, increasing funding for childcare, and expanding the earned income tax credit for lower-income residents.
This came with a caveat from Baldassare, who said given residents' personal economic worries they are not as likely to approve tax increases to fund social programs.
The discussion also touched on the impact of federal House Resolution 1, better known as the
