2025 California Budget Challenge

The Governor released his proposed fiscal year 2025-26 budget on January 10, 2025 and his revised budget will be released in May 2025.

Following large surpluses in 2021 and 2022 due to higher-than-expected revenue and federal COVID relief funds, the state is now facing a projected deficit of $14.3 billion in 2025-26 if the proposals in the budget were not adopted. This is a result of lower-than-expected General Fund revenue and the expiration of the state and national COVID emergency orders.

As part of the 2024 budget agreement, the Governor and Legislature included proposals to maintain funding for long-standing state priorities—such as healthcare, housing, homelessness, and education—while still closing the deficit in 2025-26. However, the deficit would be $14.3 billion if those proposals and new ones weren't adopted. The California Constitution requires the state to pass a balanced budget, so changes must be made to close the gap.