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Despite revenue increase, Newsom plans to pull from California's rainy day reserves

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Despite revenue increase, Newsom plans to pull from California's rainy day reserves

Gov. Gavin Newsom touted higher than expected tax revenues and a “modest surplus” in an unconventional preview of his $322.2 billion spending proposal for the upcoming fiscal year, but his office said he still plans to pull money from the state’s rainy day reserves to pay for policy priorities.

The Democratic governor delivered a selective presentation of his initial 2025-26 budget at Cal State Stanislaus on Monday that largely praised the state’s economic position under his leadership and made it difficult to understand the full scope of his spending plan. Newsom said details would be forthcoming at the end of the week.

The early, yet incomplete look at his proposal shows that Newsom’s annual spending plan has grown by $24 billion compared to the current budget enacted in July. The governor announced a projection of an extra $16.5 billion in tax revenue above his administration’s prior estimates, which the Department of Finance said is spread over three years.

“The top lines include a balanced budget, no deficits,” Newsom said.

The proposal kicks off the annual six-month process in which the governor and lawmakers negotiate a final spending plan to be approved in late June. Newsom’s presentation at a college campus in the Central Valley town of Turlock was an unusual twist on the ritual, driven by Newsom’s decision to travel to Washington, D.C., later this week for the funeral of former President Carter.

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Because he presented the budget a few days earlier than initially planned, Monday’s rollout did not include the detailed budget document that typically accompanies the governor’s presentation.

Newsom described his proposal as making “significant commitments to accountability, transparency and results” and “maintaining fiscal discipline in a time of deep uncertainty.”

Despite the revenue increase, the cost of providing Medi-Cal coverage to seniors and more undocumented immigrants, offering pre-kindergarten to all 4-year-olds, creating a new $420-million tax break for Hollywood film studios and funding other signature Newsom policies leaves California with a spending problem.

Newsom’s office said he plans to withdraw another $7.1 billion from California’s rainy day reserves in the upcoming budget year, after declaring a fiscal emergency last year to take out $5.1 billion to balance the current budget and another $900 million from a safety-net reserve.

The decision to dip into the state’s savings account was part of an agreement made last year with lawmakers to also delay programs, cut spending and rely on the occasional accounting gimmick to solve a $46.8 billion deficit. California leaders were forced to reconcile a $31.7 billion deficit the prior year.

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Senate President Pro Tem Mike McGuire (D-Healdsburg) said those tough decisions put California in a better financial position today.

“We look forward to taking a close look at the governor’s full proposal later this week,” McGuire said in a statement. “The major work will happen in the months ahead, when we’ll get down to brass tacks and craft a responsible and balanced budget which will help make California more livable and affordable.”

Assemblymember Carl DeMaio, a Republican elected in November to represent inland San Diego County, called the governor’s proposal “negligent” before Newsom even delivered his presentation.

“Gavin Newsom is in over his head and hopes that no one notices — but no amount of Enron-style accounting will change the alarming reality that Gavin Newsom has created a fiscal crisis,” DeMaio said in a statement, calling on his fellow lawmakers to reject the governor’s proposal.

Analysts warn that the financial outlook will worsen in the future with the potential for even greater economic upheaval under the incoming Trump administration.

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The California Legislative Analyst’s Office in November predicted a largely balanced budget in 2025-26 with a shortage of $2 billion, while anticipating a deficit of about $20 billion in 2026-27 and an even higher shortfall by 2028-29 of about $30 billion.

The LAO reported that the California economy has been in a gradual slowdown over the last two years, with about 25% more unemployed workers overall and declining trends in consumer spending.

Newsom did not offer a deficit projection for future years and said he will share more when he presents his revised budget proposal in May.

Corrin Rankin, vice chair of the California Republican Party, criticized the governor for not doing enough to help regular Californians.

“Handing out tax breaks to Hollywood and spending on AI is great for the state’s billionaires,” Rankin said in response to Newsom’s presentation. “However, the rest of us feel like we’re drowning in growing costs and our lives haven’t been improved.”

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Assembly Speaker Robert Rivas (D-Hollister) agreed that the state needs to tackle cost-of-living issues.

“We also need to prepare for challenges ahead and must show restraint with spending,” Rivas said in a statement. “I am committed to working with the governor and my colleagues on a budget that protects essential services and makes life more affordable.”

The Newsom administration has said President-elect Trump’s plan for international tariffs, uncertainty around federal Medi-Cal funding and threats to withhold disaster funding increase the likelihood of even greater budget uncertainty in the years ahead.

“We really have to see what fire and fury comes from Trump in the next few weeks and really get a sense,” Newsom said.

The governor is expected to leave for the Carter funeral after he spends time with President Biden Tuesday in California to celebrate the new Chuckwalla National Monument near Joshua Tree and the Sáttítla National Monument near the Oregon border.

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Joe Stephenshaw, director of the California Department of Finance, will formally present the budget to the Legislature and answer questions on Friday.

Newsom plans to leave the state Saturday for a vacation with his family.

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Politics

Video: Carter’s Coffin Transferred to Washington

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Video: Carter’s Coffin Transferred to Washington

new video loaded: Carter’s Coffin Transferred to Washington

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Carter’s Coffin Transferred to Washington

Former President Jimmy Carter’s body was moved on Tuesday from his home state of Georgia to Washington, where it will lie in state in the Rotunda of the U.S. Capitol until Thursday.

“Jimmy Carter’s work and those works speak for him louder than any tribute we can offer.” “Whether he was in the White House or in his postpresidential years, as was discussed, President Carter was willing to roll up his own sleeves to serve and get the job done.”

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Trump trolls Canada again, shares map with country as part of US: 'Oh Canada!'

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Trump trolls Canada again, shares map with country as part of US: 'Oh Canada!'

President-elect Trump on Tuesday again suggested that Canada should be added as the U.S.’s 51st state, sharing maps showing Canada as part of the U.S.

Trump shared a pair of posts to his social media platform Truth Social on Tuesday night — one with a map of the U.S. and Canada with “United States” written across the two countries and another post with the U.S. and Canada covered in an American Flag.

“Oh Canada!” he wrote in one post.

The incoming president has been pushing recently for Canada to be added to the U.S., including earlier on Tuesday.

TRUMP TROLLING CANADA AS 51ST STATE COULD BOOST DEMOCRATS WITH ‘BLUE-STATE BEHEMOTH’

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U.S. President Donald Trump, left, and Canadian Prime Minister Justin Trudeau talk prior to a NATO round table meeting at The Grove hotel and resort in Watford, Hertfordshire, England, Dec. 4, 2019. (AP Photo/Frank Augstein)

“Canada and the United States. That would really be something,” Trump said at a news conference at his Mar-a-Lago resort in Palm Beach, Florida. “They should be a state.”

On Monday, the president-elect argued in a social media post that “many people in Canada LOVE being the 51st State.”

WHAT TRUMP IS SAYING ABOUT CANADA BECOMING THE 51ST STATE

“The United States can no longer suffer the massive Trade Deficits and Subsidies that Canada needs to stay afloat,” he wrote on Truth Social.

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“Justin Trudeau knew this, and resigned. If Canada merged with the U.S., there would be no Tariffs, taxes would go way down, and they would be TOTALLY SECURE from the threat of the Russian and Chinese Ships that are constantly surrounding them,” he added. “Together, what a great Nation it would be!!!”

President-elect Trump and Canadian Prime Minster Justin Trudeau

President-elect Trump and Canadian Prime Minister Justin Trudeau. (Chip Somodevilla/Getty Images, left, CHANDAN KHANNA/AFP via Getty Images, right.)

Trudeau, who announced Monday that he will resign as Canadian prime minister once a replacement is chosen, said Tuesday there is no way Canada would join the U.S.

“There isn’t a snowball’s chance in hell that Canada would become part of the United States,” Trudeau wrote on the social media platform X. “Workers and communities in both our countries benefit from being each other’s biggest trading and security partner.”

Trump has been trolling Canada in recent weeks, floating the idea of it becoming the 51st state and posting a doctored photo of him standing beside a Canadian flag on top of a mountain.

Trump at a campaign event

President-elect Donald Trump arrives to speak at a news conference at Austin-Bergstrom International Airport, Friday, Oct. 25, 2024, in Austin, Texas. (AP Photo/Alex Brandon)

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The president-elect has also mocked Trudeau, repeatedly referring to him as “governor.” Additionally, Trump has threatened to impose massive tariffs on Canada.

Trump has also been pushing for Denmark to sell the North Atlantic island of Greenland to the U.S.

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Lawyers for security consultant say CNN report on Afghan evacuations destroyed his career

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Lawyers for security consultant say CNN report on Afghan evacuations destroyed his career

Attorneys for a U.S Navy veteran said Tuesday that their client’s reputation and earning power were destroyed by a 2021 CNN report on war profiteers following the U.S. military’s withdrawal from Afghanistan.

Zachary Young sued the network over a Nov. 11, 2021 story by chief national security correspondent Alex Marquardt about how Afghans were being charged exorbitant fees for assistance in getting out of the country.

The security consultant, whose background includes a stint with the private military contractor Blackwater, says the four-minute video package falsely portrayed him as acting illegally.

Young, who heads his own Boca Raton, Fla.-based company, was hired by corporations to get their employees out of Afghanistan, advertising his services on LinkedIn. His attorneys said his annual income went from $350,000 a year to zero after the report ran on CNN’s channels and website.

The jury in the trial, heard in a Bay County, Fla., court, will be asked to determine whether CNN journalists acted with actual malice, which is defined as the publication of false information with reckless disregard of the truth. If jurors find CNN liable, they can award Young monetary damages for loss of business income and emotional distress.

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Media companies typically settle defamation trials before they get to court, even if it’s expensive to do so. Last year Fox News paid $787.5 million to Dominion Voting Systems over false statements made about the company while reporting on President-elect Donald Trump’s claims of voter fraud in the 2020 election. Fox wanted to avoid the embarrassment of its executives being called to the stand.

But CNN is standing by Marquardt’s report. The defamation case tests how the public perceives mainstream media amid constant right-wing attacks on its credibility.

The six-person jury is from Bay County, where 73% of the votes cast in the 2024 presidential election went to Trump, a constant critic of media outlets that don’t present him in a positive light.

The core of Young’s suit is CNN’s use of the term “black market” in an on-screen graphic and in a spoken introduction before Marquardt’s report, which first aired on “The Lead with Jake Tapper.” Young, the only person mentioned by name in the segment, says the graphic gave the false impression that he was involved in illegal activity and exploited Afghans.

In opening statements at the trial, CNN’s attorney Dave Axelrod challenged Young’s claim that the report damaged his business or reputation. Axelrod said that many of the messages and contacts pertaining to Young’s activities have been deleted since the CNN story aired.

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“You’re going to see that CNN’s reporting … was accurate and you’re not going to see a single witness who will testify they thought less of Mr. Young,” Axelrod said.

Axelrod also said Young’s activities were never described as illegal. The term “black market” was used in the piece to describe unregulated activity, he added, and was not directly applied to Young.

Young’s attorney Kyle Roche argued that the dictionary defines black market as illegal.

CNN anchor Tapper delivered an on-air apology to Young over the use of the term after he objected five months after the story aired.

Roche’s opening statement also focused on the internal communications and emails between Marquardt and his producers that disparaged Young as they aggressively pursued the story.

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“I’m going to nail that Zachary Young mother———,” Marquardt wrote in one text.

“I’m going to hold you to that cowboy,” the producer replied.

Roche said emails and behind-the-scenes video footage show that “CNN took pleasure in casting [Young] as the villain for their hit piece.”

Even though CNN executives raised questions about the story — at one point saying it had “more holes than Swiss cheese” according to internal communications — it eventually passed through the network’s vetting process and was deemed ready for air, Axelrod noted.

“There is nothing false about Mr. Young in any of it,” Axelrod said.

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Although Young did not sit for an interview with CNN, he did send text messages acknowledging the high cost for his services. The text shown in the segment also made clear that Young did business with corporate sponsors.

“If someone reaches out, we need to understand that if they have a sponsor behind them to be able to pay [evacuation] costs,” said one text in the report which was shown in court.

Young took the stand in the trial and spent most of the time answering questions about his family, military background and his security work for corporations.

CNN’s Marquardt is expected to testify in the trial, which resumes Wednesday.

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