Story perspectives

California's Budget Plummets: $12 Billion Deficit Forecasted

1/1/2026

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Summary

Story summary

California's 2026 budget shifted from a $363 million surplus to a $12 billion deficit by May 2026 due to wildfires and rising Medi-Cal costs.
The state relies heavily on high-income taxes, making it vulnerable to market swings.
The Legislative Analyst’s Office projects an $18 billion deficit next year and a $35 billion structural deficit by 2027-28.
Increased Medi-Cal spending and possible federal funding losses worsen the issue, limiting legislators' options.

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Story summary

California's 2026 budget shifted from a $363 million surplus to a $12 billion deficit by May 2026 due to wildfires and rising Medi-Cal costs.
The state relies heavily on high-income taxes, making it vulnerable to market swings.
The Legislative Analyst’s Office projects an $18 billion deficit next year and a $35 billion structural deficit by 2027-28.
Increased Medi-Cal spending and possible federal funding losses worsen the issue, limiting legislators' options.