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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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Video: U.S. ‘Accelerating’ Military Assault in Iran, Hegseth Says

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Video: U.S. ‘Accelerating’ Military Assault in Iran, Hegseth Says

new video loaded: U.S. ‘Accelerating’ Military Assault in Iran, Hegseth Says

On the fifth day of the war in Iran, Defense Secretary Pete Hegseth said that the U.S. military operation was intensifying and that more warplanes were arriving in the region.

By Christina Kelso

March 4, 2026

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US submarine sinks Iranian warship by torpedo in a first since World War II

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US submarine sinks Iranian warship by torpedo in a first since World War II

NEWYou can now listen to Fox News articles!

A U.S. submarine sank a prized Iranian warship by torpedo, the first such sinking of an enemy ship since World War II, Secretary of War Pete Hegseth said Wednesday morning.

Hegseth joined Chairman of the Joint Chiefs of Staff Gen. Dan Caine at the Pentagon to provide an update to reporters on “Operation Epic Fury” in Iran.

“An American submarine sunk an Iranian warship that thought it was safe in international waters,” Hegseth said. “Instead, it was sunk by a torpedo. Quiet death. The first sinking of an enemy ship by a torpedo since World War Two. Like in that war, back when we were still the War Department. We are fighting to win.”

Caine said that an Iranian vessel was “effectively neutralized” in a Navy “fast attack” using a single Mark 48 torpedo. He added that the U.S. Navy achieved “immediate effect, sending the warship to the bottom of the sea.”

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WATCH HEGSETH’S ANNOUNCEMENT:

Hegseth said that the U.S. Navy sank the Iranian warship, the Soleimani. The flagship was named for Qasem Soleimani, an Iranian military officer who served in the Islamic Revolutionary Guard Corps who the U.S. killed in a January 2020 drone strike during President Donald Trump’s first term.

“The Iranian Navy rests at the bottom of the Persian Gulf. Combat ineffective, decimated, destroyed, defeated. Pick your adjective,” Hegseth said. “In fact, last night we sunk their prize ship, the Soleimani. Looks like POTUS got him twice. Their navy, not a factor. Pick your adjective. It is no more.”

This map shows U.S. and Israeli strikes against Iranian naval forces as of March 1. (Fox News)

Hegseth also told reporters at the briefing that the U.S. and Israel will soon achieve “complete control” over Iranian airspace after Iran’s missile capabilities were drastically diminished in the four days of fighting.

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US ‘WINNING DECISIVELY’ AGAINST IRAN, WILL ACHIEVE ‘COMPLETE CONTROL’ OF AIRSPACE WITHIN DAYS, HEGSETH SAYS

“More bombers and more fighters are arriving just today and now, with complete control of the skies, we will be using 500 pound, one thousand pound and 2,000 pound laser-guided precision gravity bombs, of which we have a nearly unlimited stockpile,” he said.

The war has killed more than 1,000 people in Iran and dozens in Lebanon, while U.S. officials said six American troops were killed in a fatal drone strike in Kuwait.

Thousands of travelers have been left stranded across the Middle East.

This map shows security and travel updates for Americans regarding countries in the Middle East region. (Fox News)

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Caine told reporters that the U.S. military is helping thousands of Americans stranded in the Middle East after the U.S. State Department urged citizens to leave more than a dozen countries.

Fox News Digital’s Ashley Carnahan contributed to this report.

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Sen. Padilla preps for Trump trying to seize control of elections via emergency order

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Sen. Padilla preps for Trump trying to seize control of elections via emergency order

Sen. Alex Padilla (D-Calif.) is preparing for President Trump to declare a national emergency in order to seize control of this year’s midterm elections from the states, including by bracing his Senate colleagues for a vote in which they would be forced to either co-sign on the power grab or resist it.

In the wake of reporting last week that conservative activists with connections to the White House were circulating such an order, Padilla sent a letter to his Senate colleagues Friday stating that any such order would be “wildly illegal and unconstitutional,” and would no doubt face “extremely strict scrutiny” in the courts.

“Nevertheless, if the President does escalate his unprecedented assault on our democracy by declaring an election-related emergency, I will swiftly introduce a privileged resolution [and] force a vote in the Senate to terminate the fake emergency,” wrote Padilla, the ranking Democrat on the Senate Committee on Rules and Administration.

Padilla wrote that such an order — which could possibly “include banning mail-in voting, eliminating major voting registration methods, voter purges, and/or new document barriers for registering to vote and voting” — would clearly go beyond Trump’s authority.

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“Put simply, no President has the power under the Constitution or any law to take over elections, and no declaration or order can create one out of thin air,” Padilla wrote.

The same day Padilla sent his letter, Trump was asked whether he was considering declaring a national emergency around the midterms. “Who told you that?” he asked — before saying he was not considering such an order.

The White House referred The Times to that exchange when asked Tuesday for comment on Padilla’s letter.

If Trump did declare such an emergency, a “privileged resolution,” as Padilla proposed, would require the full Senate to vote on the record on whether or not to terminate it — forcing any Senate allies of the president to own the policy politically, along with him.

Experts say there is no evidence that U.S. elections are significantly affected or swung by widespread fraud or foreign interference, despite robust efforts by Trump and his allies for years to find it.

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Nonetheless, Trump has been emphatic that such fraud is occurring, particularly in blue states such as California that allow for mail-in ballots and do not have strict voter ID laws. He and others in his administration have asserted, again without evidence, that large numbers of noncitizen residents are casting votes and that others are “harvesting” ballots out of the mail and filling them out in bulk.

Soon after taking office, Trump issued an executive order purporting to require voters to show proof of U.S. citizenship before registering and barring the counting of mail-in ballots received after election day, but it was largely blocked by the courts.

Trump’s loyalist Justice Department sued red and blue states across the country for their full voter rolls, but those efforts also have largely been blocked, including in California. The FBI also raided an elections office in Georgia that has been the focus of Trump’s baseless claims that the 2020 presidential election was stolen from him.

Trump is also pushing for the passage of the SAVE Act, a voter ID bill passed by the House, but it has stalled in the Senate.

In recent weeks, Trump has expressed frustration that his demands around voting security have not translated into changes in blue state policies ahead of the upcoming midterm elections, where his shrinking approval could translate into major gains for Democrats.

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Last month, Trump wrote on his Truth Social platform, “I have searched the depths of Legal Arguments not yet articulated or vetted on this subject, and will be presenting an irrefutable one in the very near future. There will be Voter I.D. for the Midterm Elections, whether approved by Congress or not!”

Then, last week, the Washington Post reported that a draft executive order being circulated by activists with ties to Trump suggests that unproven claims of Chinese interference in the 2020 election could be used as a pretext to declare an elections emergency granting Trump sweeping authority to unilaterally institute the changes he wants to see in state-run elections.

Election experts said the Constitution is clear that states control and run elections, not with the executive branch.

Democrats have widely denounced any federal takeover of elections by Trump. And some Republicans have expressed similar concerns, including Sen. Mitch McConnell (R-Ky.), who chairs the Senate rules committee.

In the Wall Street Journal last year, McConnell warned against Trump or any Republican president asserting sweeping authority to control elections, in part because Democrats would then be empowered to claim similar authority if and when they retake power.

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McConnell’s office referred The Times to that Journal opinion piece when asked about the circulating emergency order and Padilla’s resolution.

Padilla’s office said his resolution would be introduced in response to an emergency declaration by Trump, but hoped it wouldn’t be necessary.

“Instead of trying to evade accountability at the ballot box,” Padilla wrote, “the President should focus on the needs of Americans struggling to pay for groceries, health care, housing and other everyday needs and put these illegal and unconstitutional election orders in the trash can where they belong.”

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