SACRAMENTO — Hours before Gov. Gavin Newsom is expected to present his budget plan on Thursday, his office released new projections of a $16.5-billion state revenue windfall over three years and offered a rosy outlook on California’s fiscal position during his final year in office and the year after.

Newsom’s office provided few details about his plan to reduce spending or other adjustments that he would need to propose in combination with the increase in revenue to eliminate projected deficits from 2026-27 through 2027-28.

The unusual early look at his budget proposal comes as Newsom begins to wind down his time at the state Capitol and considers a run for president in 2028.

Two weeks ago, the Legislative Analyst’s Office issued an analysis of state spending that said California could not, in the long term, afford to pay for existing services and the new programs that Newsom and Democratic lawmakers have enacted since he took office in 2019. State spending has outpaced California’s strong revenue growth by about 10%, creating a perennial budget shortfall, defined as a structural deficit.

California’s spending problem threatens to define Newsom’s fiscal legacy and could provide ripe fodder for his critics. If projections of the unexpected tax windfall, which analysts attribute to stock market interest in artificial intelligence companies, bear out, the upswing could mark a lucky break for Newsom.

The governor has largely resisted adopting new across-the-board tax increases or sharply curtailing his expensive policy proposals in order to align state spending with revenue.

His budget proposal includes a call to increase taxes on corporations by limiting state tax credits to no more than $5 million, or 50% of a company’s tax liability, beginning in the tax year 2027. No estimates were offered to explain how much revenue the new cap would bring in to support the state budget.

The preview of his budget has several new spending proposals, including providing $300 million to help low-income Californians keep $0 monthly premiums on healthcare coverage through the Affordable Care Act in response to cuts by the federal government, as well as $100 million to help wildfire victims afford construction loans to rebuild their homes. Two days before Mother’s Day, Newsom also introduced a plan to provide 400 free diapers for every California newborn at select hospitals beginning this summer.

Newsom is expected to present his budget in more detail late Thursday morning in Sacramento.

President Donald Trump opened his high-stakes meeting with Chinese President Xi Jinping by predicting a “fantastic future together” — striking an unusually warm tone as his administration pursues new trade and investment deals with Beijing.

“In fact, the longest relationship of our two countries that any president and president has had,” Trump said at the start of the bilateral meeting Thursday local time. “We’ve had a fantastic relationship. We’ve gotten along.”

“And whenever we had a problem, we worked that out very quickly,” he continued. “We’re going to have a fantastic future together.”

Trump also praised Xi directly, calling him “a great leader” and emphasizing the personal relationship between the two leaders as a foundation for future cooperation.

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Xi, in his own opening remarks, emphasized cooperation and shared interests between the two countries.

“As leaders of major countries, this year is the 250th anniversary of American independence,” Xi said, according to a translator. “Congratulations to you and to the American people. I always believe that our two countries have more common interests than differences.” 

“Success in one is an opportunity for the other, and a stable bilateral relationship is good for the world,” he continued.

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“China and the United States both stand to gain from cooperation and lose from confrontation. We should be partners, not rivals. We should help each other succeed and prosper together, and find the right way for major countries to get along well with each other in the new era.”

Xi added that he looked forward to working with Trump “to set the course for and steer the giant ship of China–U.S. relations so as to make 2026 a historic landmark year that opens up a new chapter in China–U.S. relations.”

The comments came as Trump arrived in Beijing accompanied by a delegation of top American executives, underscoring the administration’s focus on economic dealmaking even as broader tensions between the two countries remain unresolved.

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“I just want to say, on behalf of all of the great delegation that we have … we have the greatest businessmen,” Trump said. “We ask the top 30 in the world. Every single one of them said yes.”

The delegation includes executives from major U.S. firms spanning aerospace, finance, technology and agriculture, including Apple CEO Tim Cook, BlackRock CEO Larry Fink, Blackstone CEO Stephen Schwarzman, Boeing CEO Kelly Ortberg, Tesla and SpaceX CEO Elon Musk, Goldman Sachs CEO David Solomon and Qualcomm CEO Cristiano Amon.

White House officials said ahead of the trip that Americans should expect the president to “deliver more good deals,” with talks expected to include aerospace, agriculture and energy, as well as continued work on a proposed U.S.-China “Board of Trade” and “Board of Investment.”

A senior administration official said the potential trade framework under discussion could involve “double-digit billion” levels of commerce, along with possible purchase commitments from China in areas such as aircraft and agricultural products.

The emphasis on dealmaking comes after years of friction between Washington and Beijing over trade, technology and military competition.

Trump has imposed sweeping tariffs on Chinese goods — a policy he has continued into his second term — while repeatedly accusing Beijing of unfair trade practices.

He also has criticized past U.S. policy that helped integrate China into the global trading system, arguing Beijing benefited from open markets without offering the same access in return.

But in his opening remarks Thursday, the president emphasized business ties and personal rapport, highlighting what appeared to be an effort to stabilize economic relations between the world’s two largest economies.

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The comments came as administration officials said trade discussions with China are ongoing, alongside talks on issues including Iran, artificial intelligence and other security matters.

Trump’s praise of Xi is consistent with his longstanding approach of using personal diplomacy with foreign leaders, including rivals, as a negotiating tactic — though whether that approach will translate into concrete agreements with China remains to be seen.