Politics
Taxes, program cuts and Newsom’s legacy on the line in budget negotiations
SACRAMENTO — One of Gavin Newsom’s top goals as he winds down his final year as California governor is to leave the state with a balanced budget.
After years of the state spending more money than it brings in, it’s Newsom’s last opportunity to fix a chronic deficit or dump the problem on the next governor.
How far he goes to solve the state’s structural spending imbalance will define his legacy as a steward of trillions in taxpayer dollars. As a potential candidate for president in 2028, he could also have a political incentive to do as little as possible.
“Any cuts you make are going to cause people to scream,” said Darry Sragow, a veteran Democratic strategist. “Any increases in taxes are going to cause people to scream and in terms of what’s best for a presidential run, it would be nice if people weren’t screaming.”
As California’s 40th governor, Newsom expanded publicly funded healthcare to income-eligible undocumented immigrants, increased state-subsidized child-care slots and provided free meals for schoolchildren among a wishlist of progressive wins since he took office in 2019.
His achievements have helped struggling Californians live in an increasingly unaffordable state and given him bona fides to tout to voters if he launches a bid for the White House.
But the state could never afford to pay for existing services and the new programs that Newsom and Democratic lawmakers enacted, according to an analysis of ongoing state spending since before the pandemic released by the Legislative Analyst’s Office last week.
Spending from the state’s principal operating fund has grown about $100 billion since Newsom’s first full fiscal year in office in 2019-20, mostly due to the growing cost of existing programs that he inherited. State spending has outpaced California’s strong revenue growth by about 10%, creating a perennial budget shortfall — a structural deficit — that Newsom and the Democratic-led Legislature solve with largely temporary fixes each year.
Instead of making across-the-board program cuts or raising taxes to align spending with revenue, Democrats have tapped into reserves designed to preserve social services for the state’s most disadvantaged communities during economic downturns.
While the California economy remains stable and state revenue has increased, Newsom and lawmakers have taken $12.2 billion from the rainy day fund. Democrats have borrowed $28 billion more from other state funds to cover their spending in recent years, according to the LAO.
“Taken together, these trends raise serious concerns about the state’s fiscal sustainability,” Legislative Analyst Gabriel Petek wrote in a review of Newsom’s January budget proposal.
Fiscal watchdogs have warned that the spending trends will leave California in a precarious position if the stock market tanks and tax receipts bottom out.
Personal income taxes are driving higher-than-expected revenue now, which analysts attribute to an artificial intelligence boom on Wall Street, and suggest the state could have no deficit in the upcoming year. In January, the Newsom administration anticipated significant operating deficits in the years ahead: $27 billion in 2027-28, $22 billion in 2028-29 and $23 billion in 2029-30.
The LAO, the Legislature’s nonpartisan fiscal advisor, said the state has already solved $125 billion in budget problems over the last three years with mostly short-term solutions.
“This issue is really whether they’re going to take seriously the structural deficit that is several years in the making now, where the spending has outpaced revenue, and to address that, they’re going to either have to make some fairly deep cuts or raise revenue and or both,” said former state Controller Betty Yee, who worked as a budget aide under Gov. Gray Davis and recently dropped her own campaign for governor. “But they have to be real. I think resorting to these one-time solutions has really exacerbated the problem.”
How Newsom wants to address the state’s financial challenges will be revealed on May 14 when he is expected to present his revised budget plan in Sacramento. His January budget proposal did not include any significant reductions or cuts to programs.
H.D. Palmer, a spokesperson for the California Department of Finance, said the governor is looking to solve the budget problem with more than a temporary fix.
“Although he is still finalizing his proposal that he’ll put forth to the Legislature, as he has said, he wants those solutions to be durable, and he wants them to have an impact beyond a single fiscal year,” Palmer said.
To stabilize California’s budget, Democrats will probably have to raise taxes or fees to generate new revenue and cut programs, according to the LAO. At least 40 cents for every dollar in revenue is dedicated to education under the state Constitution, requiring policymakers to find between $30 billion and $60 billion annually in additional revenue to cover projected shortfalls in 2027-28 and beyond if relying on new taxes alone.
President Trump’s cuts to healthcare are adding to the problem.
HR 1 will add $1.4 billion in state costs to the general fund. Newsom’s January budget proposal did not include a plan to help millions of low-income Californians who are expected to lose access to healthcare under the federal cuts.
To temper those cuts in California, other groups proposed a new tax on billionaires that appears poised to qualify for the November ballot.
Spearheaded by Service Employees International Union-United Healthcare Workers West, the initiative would apply a one-time 5% tax on taxpayers with assets exceeding $1 billion. If approved by voters, the tax would generate roughly $100 billion, which would fund healthcare programs.
The measure has divided unions and Democrats at the state Capitol.
Newsom has criticized the initiative, citing concerns that increasing taxes on the wealthy will have the opposite intended effect and drive the highest earners out of California. Under a progressive tax structure, the state budget is dependent on income taxes paid by the ultra-rich on earnings largely from capital gains.
Larry Page and Sergey Brin, the co-founders of Google, have already purchased residences in Florida, along with others looking to escape the tax if it goes through in November. Billionaires launched their own ballot measure campaign to undercut the tax proposal.
State lawmakers are also considering avenues to raise revenue, which include repealing a “water’s edge” tax break. Under the change, multinational companies would no longer be allowed to shield the income of their foreign subsidiaries from state taxes. California loses about $3 billion in revenue from the tax break each year.
In its budget plan released in April, the state Senate proposed a new fee on the largest corporations in the state to provide $5 billion to $8 billion annually for Medi-Cal.
The upper house said 42% of Medi-Cal enrollees are full-time workers who are not enrolled in their company’s healthcare plan because their wages are low enough to qualify for state-subsidized healthcare. As a result, corporations aren’t paying for healthcare for many of their employees and instead taxpayers are picking up the bill through Medi-Cal.
SEIU California, the powerful state union council representing over 700,000 workers, endorsed the plan. The union said Trump’s tax policy will reduce corporate taxes by $900 billion, while 3 million Californians lose healthcare.
“In this urgent moment, California’s workers need to see our leaders show us what they’re made of,” said Tia Orr, executive director of SEIU California. “The Senate is showing the courage to demand corporations pay their fair share, rather than making working people pay with their lives.”
The change is being described as a more politically palatable “fee” and not a tax.
“We explored multiple revenue options, and this was the one that felt more narrow, it felt more focused, and it also felt like it was directly going for the subsidy that’s being lost because of the Trump HR 1 cuts,” said Senate President Pro Tem Monique Limón (D-Goleta), who leads the upper house of the Legislature.
Limón said her caucus believes it’s important to address potential revenue streams because of the depth of federal healthcare reductions.
“If we don’t address the structural deficit, we are looking at severe cuts,” she said. “You are looking at people without health insurance. You are looking at hospitals closing down. You are looking at medical providers not being able to take more patients. You are looking at our emergency rooms over capacity, with not enough medical providers. I mean, you’re looking at a place that’s really, really, really difficult, and we feel like we have to, at least, look at what are viable options that are conditional on these cuts coming.”
Newsom has not commented publicly on the Senate’s plan. As governor, he’s been reluctant to embrace new taxes and fees.
Newsom could reject all the proposals for new taxes or fees and continue what he’s done before: take advantage of higher-than-expected tax collections, shift funds around, delay program implementation and borrow money to knock the deficit down to zero, or forecast a surplus, for his last budget year that begins July 1.
If he doesn’t take on California’s larger budget imbalance, then the problem would be the next governor’s to solve. A stock market crash, or economic recession, could force his successor to make drastic cuts across the board with limited reserves to support programs.
Kicking the can again would cement Newsom’s fiscal legacy as a governor who championed bold headline-making policies that bolstered the safety net for low-income Californians, but who failed to provide a solution to pay for his agenda.
“Not only has he not come up with a plan, he has pretended we don’t need one,” said Patrick Murphy, a professor of public affairs at the University of San Francisco.
Newsom’s interest in running for president could seemingly discourage him from slashing the budget and raising attention to the state’s financial woes, Sragow said. Newsom is setting himself up as a potential front-runner for his party. He has said he remains undecided about officially launching a 2028 campaign.
As a Democrat from California, his opponents would automatically label him as financially irresponsible and tax-happy. Calling out the massive budget problem on the horizon, raising taxes and making painful cuts will give them ammunition.
“There’s a long list of things that he’s going to be charged with, and this is likely to be one more,” Sragow said. “But I guess the question is, is he going to be charged with a political misdemeanor or a political felony?”
Former state Sen. Steve Glazer said Newsom is standing on political quicksand either way. State budget projections are based on assumptions about the future that often don’t bear out, leaving his choices exposed to criticism that he went too far, didn’t do enough, and everything in between.
“Whatever the governor decides to do in his May revise and in his final budget, it’s fraught with political risks, because it can be manipulated so easily by all sides,” Glazer said.
If Newsom ignores the spending problem, his successor could blame him for California’s financial woes when they take office in January and provide their own outlook of the state’s fiscal future. At the time, Newsom could be trying to convince America to make him the nation’s next president.
Murphy said Newsom has championed major policies and been reluctant to back off them later when revenue doesn’t pencil out.
In terms of spending, he’s governed similarly to the men who led California before him, with the exception of Jerry Brown, who cut programs to reduce a deficit he inherited in his second stint in the governor’s office and left Newsom with a surplus.
“It’s not all that different than most of the governors have done, which is finding it very hard to say no and finding it very hard to take on a tough choice of going to the ballot to ask for more money or raise taxes,” Murphy said.
On taxation, Newsom is perhaps most similar to former Gov. George Deukmejian, who opposed general tax increases for most of his administration.
Deukmejian left a budget disaster for his successor, Gov. Pete Wilson. Deukmejian publicly claimed he passed a balanced budget in his final year and blamed an economic downturn for the problems Wilson encountered.
When Wilson announced a record $13-billion budget deficit early in his first year in office in 1991, he said the Persian Gulf War, an economic downturn and natural disasters added to a structural deficit in the budget.
The Legislature and Deukmejian, Wilson said, had “papered over” the problem.
Politics
DOJ expands indictment against SPLC, alleging $4M secretly funneled to KKK and extremist groups
NEWYou can now listen to Fox News articles!
The Department of Justice last month announced an indictment against the Southern Poverty Law Center (SPLC), alleging that the civil rights nonprofit defrauded donors by secretly paying informants associated with extremist organizations, including the Ku Klux Klan.
A federal grand jury in the Middle District of Alabama returned an 11-count indictment in April charging the SPLC with six counts of wire fraud, four counts of making false statements to a federally insured bank and one count of conspiracy to commit concealment money laundering, according to the Justice Department.
The superseding indictment retains those charges while expanding on the alleged misconduct.
According to the DOJ, the SPLC “secretly funneled” more than $3 million in donor funds between 2014 and 2023 to numerous individuals associated with extremist organizations, including the Ku Klux Klan, United Klans of America, the National Socialist Movement, participants in the Unite the Right rally and the Aryan Nations-affiliated Sadistic Souls Motorcycle Club.
NEO-NAZIS, ‘SADISTIC’ BIKERS AND CHARLOTTESVILLE ORGANIZER: 5 OF THE MOST SHOCKING SPLC INFORMANTS
The Southern Poverty Law Center has widespread influence in education. FILE: Acting Attorney General Todd Blanche, left, and SPLC interim President and CEO Bryan Fair are shown in a split image as the Justice Department pursues charges against the Southern Poverty Law Center. (Nathan Posner/Anadolu via Getty Images; USA TODAY Network via Imagn Images)
The original indictment alleged approximately $3 million in payments between 2014 and 2023.
“The SPLC’s paid informants (‘field sources’) engaged in the active promotion of racist groups at the same time that the SPLC was denouncing the same groups on its website,” the indictment states.
Prosecutors further allege the SPLC opened bank accounts tied to fictitious entities in order to conceal donor funds that were allegedly routed to confidential sources.
MIKE DAVIS: SOUTHERN POVERTY LAW CENTER: A TALE OF A RACISM SCAM
The Southern Poverty Law Center (SPLC) building seen in March 2020 in Montgomery, Alabama. (Barry Lewis/InPictures via Getty Images)
According to the indictment, the SPLC began operating a covert informant network in the 1980s, and between 2014 and 2023 allegedly paid those sources in a clandestine manner.
The DOJ alleges an SPLC employee instead encouraged the pair to remain involved and offered them a monthly salary of $1,200.
The two subsequently agreed to remain in the organization, according to the indictment.
DR. BEN CARSON: I KNOW HOW BAD THE SPLC WAS, IT CAME AFTER ME AND PUT ME AT RISK
Acting Attorney General Todd Blanche spoke during a press conference alongside FBI Director Kash Patel at the Department of Justice on April 21, 2026, in Washington, D.C., following the indictment of the Southern Poverty Law Center. (Nathan Posner/Anadolu via Getty Images)
Prosecutors allege an SPLC employee instructed the individuals to claim they worked for a company called Rare Books and helped college students with research and writing assignments if anyone questioned the source of their income.
The indictment alleges donor funds were used to pay both individuals through SPLC accounts.
According to prosecutors, the pair were also reimbursed for expenses related to Ku Klux Klan activities, including cross-burning events and associated costs such as wood and fuel.
One of the individuals is also accused of recruiting new members using donor-funded payments. The indictment further alleges the SPLC knew donor funds were used to purchase materials for Ku Klux Klan garments.
In a statement to Fox News Digital, attorney Abbe Lowell, who represents the SPLC, denied the allegations.
A composite image shows Acting Attorney General Todd Blanche overlaid on photographs of the Department of Justice and FBI headquarters in Washington, D.C. (Valerie Plesch/Bloomberg via Getty Images; Graeme Sloan/Bloomberg via Getty Images)
“This apparent superseding indictment attempts to shore up the flaws in the initial charges, but it changes nothing,” Lowell said.
“The SPLC did not lie to its donors, it did not mislead banks it did business with, and its informant program prevented violence and saved lives,” he continued.
“It appears the Justice Department shared the indictment with media before it was unsealed by the court – another example of the government’s troubling handling of this case.”
“We will be addressing these irregularities with the court and look forward to presenting the truth at trial,” he added.
NONPROFIT REVENUE TOTALS SURGE AMID GROWING SCRUTINY AFTER MAJOR FRAUD CASES
SPLC interim President and CEO Bryan Fair speaks during a wreath-laying ceremony at the Southern Poverty Law Center Civil Rights Memorial in Montgomery, Ala., on March 5, 2026. (Jake Crandall/Advertiser / USA TODAY NETWORK via Imagn Images)
The superseding indictment also notes that the SPLC’s reported revenue increased from roughly $38.7 million in 2010 to more than $129 million in 2023, an increase of approximately 233%.
According to the filing, the organization’s net assets grew from approximately $238 million to nearly $787 million during the same period.
The SPLC is a longtime nonprofit organization that says it combats white supremacy and extremism through research, reporting and monitoring efforts intended to assist law enforcement and the public.
During a news conference announcing the original indictment, Acting Attorney General Todd Blanche alleged the SPLC paid members of extremist groups so it could generate “work product” documenting their activities.
CLICK HERE TO DOWNLOAD THE FOX NEWS APP
“To that end, [SPLC] was doing the exact opposite of what it told its donors it was doing – not dismantling extremism but funding it,” Blanche said.
Fox News Digital’s Alexandra Koch, David Spunt, Jake Gibson and Alec Schemmel contributed to this report.
Buoyed by a new Congressional map favoring their party, California Democrats were eyeing Tuesday’s primary elections as a critical first step toward flipping a handful of House seats and taking back power in Washington.
Results from California’s massive and slow-moving election process were not immediately clear late Tuesday, as polls closed and mail ballots continued to be processed and counted. Still, Democrats were bullish about their chances of advancing candidates to November’s general election in all five districts that were redrawn in their favor as a result of last year’s Proposition 50 ballot measure.
“The path to winning back the House starts with voting in the June 2nd primary,” the California Democratic Party posted online Monday.
Meanwhile, California Republican Party Chairwoman Corrin Rankin urged Republican voters to make their own voices heard too.
“Like President Trump said, we need to make it too big to rig,” Rankin said on “The Benny Show.” “We need to swamp the vote.”
One of the most closely watched races was in the redrawn 22nd Congressional District in the Central Valley, where incumbent Rep. David Valadao (R-Hanford) is facing challenges from moderate Assemblymember Jasmeet Kaur Bains (D-Delano) and progressive college professor Randy Villegas.
Another closely watched race was in the redrawn 48th Congressional District in San Diego and Riverside counties, where Rep. Darrell Issa (R-Bonsall) decided to retire rather than run for reelection, and where Republican San Diego County Supervisor Jim Desmond — who is endorsed by Trump — is running against a pack of Democrats.
Prop. 50 — which Californians passed with nearly 65% of the vote a year ago — was California Democrats’ response to Texas Republicans redrawing their state’s Congressional maps in the GOP’s favor, at President Trump’s behest. It was also the only major Democratic counterpunch in the wider mid-decade redistricting brawl that has spread across the country in the last year.
Experts expect the redistricting battle to deliver a net gain of a handful or more House seats to Republicans. But Democrats could gain even more ground given Trump’s lousy approval ratings and the long history of midterm election losses for the president’s party.
Combined, those factors make the battle for control of the House incredibly close, which in turn makes the five seats up for grabs in California pivotal — and potentially decisive.
Tuesday’s primaries won’t determine if any of those five seats will indeed flip parties in November. However, the primaries will define those head-to-head races to come and better inform the odds of Democrats toppling Republican incumbents, experts said.
In addition to flipping the seats currently held by Valadao and Issa, Democrats are hoping to pick up three additional seats.
In the 1st Congressional District — which after Prop. 50 lost rural reaches of northeast California and picked up liberal North Bay communities — various candidates were vying for the seat long held by the late Rep. Doug LaMalfa (R-Richvale), who died in January. They include Democratic state Sen. Mike McGuire and Republican Assemblymember James Gallagher, who is endorsed by Trump.
Voters from the existing district are also voting in a special election Tuesday to fill the remainder of LaMalfa’s term.
In the 3rd Congressional District, which lost an eastern rural stretch along Nevada and now holds more tightly to the Sacramento suburbs, Rep. Ami Bera (D-Elk Grove) — who currently represents a different district — is running to remain in Congress in a new seat.
Meanwhile, the 3rd Congressional District’s incumbent, Rep. Kevin Kiley (I-Rocklin), is seeking to do the opposite. He quit the Republican Party, became an independent and is now running for Bera’s current seat in Congressional District 6, which includes the city of Sacramento and Placer County suburbs.
In the 41st Congressional District, which became more liberal after Prop. 50 by losing voters in Riverside County and gaining them in Los Angeles County, a slate of candidates — including Rep. Linda Sánchez (D-Whittier), who currently represents a different district — are running to replace Rep. Ken Calvert (R-Corona). Calvert, a 17-term incumbent, decided to run in the neighboring 40th Congressional District instead.
In the 40th Congressional District, which covers a swath of inland Orange County and portions of San Bernardino and Riverside counties, incumbent Rep. Young Kim (R-Anaheim Hills) is now going head-to-head with Calvert, while also facing several Democratic challengers.
Other districts that were not part of the Prop. 50 shuffle are also attracting attention.
In the 11th Congressional District in San Francisco, several Democratic candidates are vying to replace Rep. Nancy Pelosi (D-San Francisco), the retiring former House Speaker, including state Sen. Scott Wiener; tech millionaire and Democratic political operative Saikat Chakrabarti; and Connie Chan, a member of the San Francisco board of supervisors who Pelosi endorsed.
Democrats are also closely watching several races where younger Democrats and progressives are challenging older incumbent Democrats, and where newer Democratic incumbents are seeking to hold onto their seats in relatively competitive districts.
NEWYou can now listen to Fox News articles!
LOS ANGELES — Outside a Bristol Farms market in LA’s Westchester neighborhood, residents who spoke to Fox News Digital all agreed that homelessness is a top problem facing the city, but disagreed on which mayoral candidate is the right choice to clean it up.
“Love him,” Shelley Zuckerman said about reality television star and independent candidate Spencer Pratt, adding that homelessness is a main motivator of her support for the reality TV star’s mayoral run.
“The fact that he’s not a politician, so he may or may not be a liar, we don’t know that yet, and I know that he wants to do something for LA that the politicians have been saying they’re going to do and then don’t,” Zuckerman added. “And I know politics works, that once you get in there you can’t always do what you want to do, but at least he’s got the passion.”
SPENCER PRATT SAYS HIS POLICY WILL FORCE HOMELESS OUT OF LA AND INTO CITIES LIKE SEATTLE
Los Angeles residents say homelessness is the top problem facing the city as they head to the polls for the mayoral primary. (Fox News Digital)
When asked if crime was a motivating factor to vote for Pratt, Zuckerman’s husband Saul responded, “Of course.”
The couple says they are supporting Republican Steve Hilton for governor.
Patrick Reynolds, who lives in the neighborhood, said he is “not happy with any of the candidates” and called Pratt a “clown” before saying he voted for incumbent Mayor Karen Bass “a little reluctantly.”
Homelessness has been a top-of-mind concern for voters in Los Angeles, and despite Bass being mayor for the last four years, Reynolds said he believes she’s the best choice on that front.
Reynolds, who said he is supporting billionaire Democrat Tom Steyer for governor, spoke at length about the problems with homelessness, including a local park he said has become “too dangerous” to visit in recent years.
KAREN BASS GRILLED OVER BROKEN HOMELESSNESS PROMISE, BLAMES BUREAUCRACY FOR SLOWED PROGRESS
Mayoral candidate Spencer Pratt hosts a campaign block party on 10th Avenue in Los Angeles on May 20, 2026. (Robert Gauthier/Los Angeles Times)
“Homelessness for sure,” a woman named Diane, who said she voted for Bass, told Fox News Digital, “That’s number one on my list, and I think she’s tried very hard to fix that problem. It’s a big problem, I know. And I just think she is down to earth. She’s not some rich billionaire, which I appreciate.”
Diane said she is supporting former Department of Health and Human Services Secretary Xavier Becerra, a Democrat who served in the Biden administration, for governor because he is a “good guy.”
“I like that he is an immigrant and that he has worked his way up in this world,” Diane said. “I think he has a good sensibility. I like also that he isn’t a billionaire. I can relate to him.”
Dan Madden, a resident of nearby Manhattan Beach, told Fox News Digital that if he could vote in LA proper, he’d go with Pratt.
WHO IS TOM STEYER? ANTI-ICE BILLIONAIRE IN CA GOVERNOR’S RACE FACES SCRUTINY OVER DETENTION INVESTMENTS
A Los Angeles city councilwoman and progressive candidate for mayor Nithya Raman, left, pictured alongside incumbent mayor Karen Bass, right. (Ronaldo Bolaños/Los Angeles Times via Getty Images; Justin Sullivan/Getty Images)
“That’d be my man,” said Madden, who added that he is voting for Hilton for governor. “The last 20 years in Los Angeles has been screwed.”
“It’s getting worse,” Madden said about the homeless situation in the Los Angeles area. “They cleaned up here and there. Spots, especially along the beach, coastline, you see it cleaned up. Two months later, everybody’s back.”
CLICK HERE TO DOWNLOAD THE FOX NEWS APP
Pratt, a registered Republican running as an independent, faces off in a nonpartisan mayoral primary against incumbent Mayor Karen Bass, a Democrat, and City Councilmember Nithya Raman, a socialist.
Tuesday’s election will determine which two candidates advance to the November general election. If a candidate receives more than 50% of the vote, they will automatically be named the next mayor.
-
Indiana24 seconds agoIndiana football has top-rated transfer in ESPN rankings, and 3 in top 20
-
Iowa3 minutes agoZach Lahn projected to win Iowa GOP governor primary, upsetting Trump’s pick in a state Democrats hope to flip
-
Kansas8 minutes agoBat Cats defeat Kansas Cannons, 4-1
-
Kentucky15 minutes agoUK Healthcare prepares to become Kentucky’s only Level 2 special pathogen treatment center
-
Louisiana18 minutes agoHeart of Louisiana: Civilian Conservation Corps
-
Maine23 minutes agoOpinion: Owen McCarthy offers Maine Republicans real change
-
Maryland30 minutes agoMaryland Dem lawmaker runs taxpayer-funded nonprofit with audit struggles
-
Michigan33 minutes agoResidents in Taylor, Michigan, fight against possible rezoning
