Gov. Newsom announces $32 billion budget deficit, $10 billion more than previously estimated

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California Gov. Gavin Newsom announced Friday that the Golden State’s budget deficit is $10 billion higher than he predicted earlier this year.

Newsom said during a press conference that California’s budget deficit has grown to nearly $32 billion, which is about $10 billion more than he anticipated in January when he offered his first budget proposal.

"We have a $31.5 billion challenge, which is well within the margin of expectation and well within our capacity to address," Newsom said.

California, which has the largest budget in the nation at $306 billion, is one of the few states to have a shortfall this year. Some say it is due in part to a progressive tax code that relies on wealthy taxpayers whose income is closely tied to the performance of the stock market.

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Gov. Gavin Newsom pauses while speaking to the press during a visit to Melrose Leadership Academy in Oakland, Calif. (Jane Tyska/Digital First Media/East Bay Times via Getty Images)

In January, Newsom proposed a number of ideas to cover the deficit, including about $9.6 billion in spending cuts that hit some of the state’s ambitious climate programs and other policy areas. His latest proposal includes roughly another $1 billion in spending reductions. 

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Some of that comes from clawing back unspent money in various programs, including those designed to provide tax refunds and help people with their utility bills.

He’s making up the rest of the deficit by shifting expenses, taking some money from the state’s safety net reserve and borrowing.

An aerial view of the California State Capitol Feb. 1, 2023, in Sacramento.  (Justin Sullivan/Justin Sullivan)

"This was not an easy budget, but I hope you see we will try to do our best to hold the line and take care of the most vulnerable and most needy but still maintain prudence," Newsom said.

In a press release, Newsom's office said it was prepared for the shortfall "with the governor and legislature paying down the state’s prior debts, building unprecedented reserves and prioritizing one-time investments."

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Republican legislative leaders blasted Newsom’s proposal as another marker of irresponsible spending by the Democrats who control Sacramento.

"His cuts to drought programs are dangerous, his ‘fiscal gimmicks’ are shortsighted and his words about good government and efficiency are yet another empty promise. Californians deserve better," Republican Assembly Leader James Gallagher said in a statement.

Democratic California Gov. Gavin Newsom (Justin Sullivan/Getty Images)

Newsom’s press conference comes roughly a year after he touted a budget surplus of $97 billion and said it was "simply without precedent."

The budget shortfall announcement comes almost exactly a week after a committee established by Newsom recommended cash reparations payments to Black residents to make amends for slavery that could cost the state billions if approved by the legislature.

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Shortly after the committee approved the plan, Newsom distanced himself from the idea of cash payments to Californians in response to slavery, which was never legal in the state.

Associated Press contributed to this report