California Gov. Gavin Newsom unveiled a revised budget that shows no deficit for this year and next, as the state draws another boost from the technology and artificial-intelligence boom.
The budget proposal released Thursday shows revenues that are $16.5 billion higher than projections. That improvement gives Newsom, a Democrat, more room to protect programs popular with the party’s voters as he prepares to leave office after the next election, as a potential contender for the presidency in 2028.
But the surge in revenue doesn’t erase California’s longer-term financial problems, leaving the next governor to manage a budget that remains vulnerable to any reversal in markets.
Related: States Across Wildfire-Prone West Are Using AI for Early Detection
The May revision builds on Newsom’s January proposal, which called for a $349 billion spending plan for the fiscal year beginning in July and narrowed the projected deficit to about $3 billion as stronger cash receipts, resilient financial markets and a better economic outlook lifted revenue.
The latest revenue gain exposes a familiar vulnerability for California. The state draws heavily on taxes from high earners and capital gains, making its budget especially sensitive to stock-market swings. When technology fortunes rise, Sacramento benefits quickly. When markets turn, the revenue can disappear just as fast.
California policymakers are bracing for further political uncertainty too, as President Donald Trump’s administration has ushered a raft of healthcare policy changes through Congress with implications that states have only begun to feel.
Related: AI Firms Agree to Give US Early Access to Evaluate Their Models
About two million Californians are slated to be disenrolled by the end of 2030 from the state’s medicaid program under changes backed by the Trump administration, according to the Legislative Analyst’s Office.
Newsom’s budget on Thursday included a $300 million investment to help with Obamacare premium assistance, which will keep $0 monthly health plans available for lower-income Californians.
The new proposal comes as lawmakers fight over a potential billionaire tax that could appear on the November ballot. Supporters point to AI-driven wealth gains as evidence that California should capture more from those who have benefited most. Newsom and other opponents argue the state already depends heavily on its richest residents and risks weakening that tax base if it pushes too far.
The issue has already split prominent Democrats running for governor, with former U.S. Representative Katie Porter raising concerns and billionaire Tom Steyer saying he would support the measure if it reaches voters. The fight has also drawn in some of Silicon Valley’s biggest fortunes, including Google co-founder Sergey Brin, a prominent critic of the proposal.
The May revision starts the final stretch of budget negotiations with lawmakers, who must pass a spending plan by June 15 for the fiscal year beginning July 1 or risk forfeiting their pay.
Copyright 2026 Bloomberg.
Topics
InsurTech
California
Data Driven
Artificial Intelligence
Interested in Ai?
Get automatic alerts for this topic.
