The Brief

Gov. Gavin Newsom’s office on Friday forecast a “modest shortfall” of $2.9 billion for the upcoming fiscal year, down sharply from previous estimates in a nearly $349 billion budget proposal that relies heavily on continued windfalls from tech and AI stocks.

The governor’s 2026-27 budget proposal projects $9 billion more in revenue than anticipated, banking on the AI-driven economy to last. It’s significantly rosier than the grim outlook by the nonpartisan Legislative Analyst’s Office, which in November projected an $18 billion deficit.

“A downturn in the market is one of the top risks,” said state Department of Finance Director Joe Stephenshaw.

Newsom’s spending proposal is nearly $30 billion more than this year’s budget. It includes $248.3 billion in the general fund, the primary account for state operations, up by $18 billion.

The spike in spending is partly driven by the need to implement federal cuts to the Medi-Cal program and constitutional requirements to deposit portions of higher-than-expected revenue into education and state reserves.

The budget calls for the University of California to get $350 million more in 2026-27 and the California State University system to get $365 million more, largely to fulfill Newsom’s 2022 promise to increase the universities’ spending by 5% annually for five years.

Newsom’s budget doesn’t include any cuts to K-12 schools, and preserves some of his initiatives related to school meals, community schools, after-school and summer programs and transitional kindergarten. Per-pupil spending would jump slightly to $27,400. It also includes a $509 million increase in special education funding, and a 2.41% cost-of-living increase.

Newsom’s proposal is the opening salvo in months of budget negotiations that begin in earnest in June.

The projected deficit could balloon to $22 billion in fiscal year 2027-28, a problem the governor will address in an updated fiscal forecast in May, Stephenshaw said.

Other state departments will see less funding under Newsom’s spending plan, though Stephenshaw emphasized that there were no major cuts in the proposal. Newsom wants to spend $1.3 billion less on housing and homelessness next year, slashing the department’s budget by more than half. Stephenshaw said some one-time dollars for housing and homelessness have run out and the state is not proposing to renew them.

Newsom’s sunnier forecast could delay calls for long-term financial fixes such as new taxes.

Bolstering the rainy day fund

Nodding to “long-term structural challenge,” Newsom wants to deposit $3 billion into the state’s rainy day fund Budget Stabilization Account, as well as $8.6 billion into two other reserve accounts. He’s also proposed spending $11.8 billion over the next four years, including $3 billion this upcoming year, to pay down the state’s pension liabilities.

“There are encouraging signs in the California economy,” Newsom said in a written statement accompanying the budget. “Yet history teaches us that prosperity, if taken for granted, can vanish as quickly as it arrives. California’s responsibility is to act with steady hands and anticipate future instability.”

California's Director of Finance, Joe Stephenshaw, leads the budget proposal presentation for the 2026-27 fiscal year, at the Capitol Annex Swing Space in Sacramento, on Jan. 9, 2026. Photo by Fred Greaves for CalMatters Newsom did not attend Friday’s budget presentation, after he painted a rosy picture of California’s fiscal future during his State of the State address Thursday. Flashing top-line numbers, the Democratic governor touted billions of dollars more in revenue, proposed new investments in education and pledged more toward the state’s reserves and pension debt.

He avoided revealing the budget deficit and did not say whether closing the gap would require painful spending cuts to core services like child care, food assistance and Medi-Cal, the state’s health care coverage for low-income residents, especially as federal funding diminishes.

Newsom teased multiple new proposals, such as fully funding the state’s universal transitional kindergarten program and providing universal before and after-school programs at elementary schools.

The TK program will cost $1.9 billion annually, according to his budget proposal.

Newsom also proposed spending $1 billion to add high-needs community schools and redirecting $1 billion in Proposition 1 mental health funds annually for housing and homelessness.

County government officials were dismayed the budget doesn't include more robust funding to backfill federal cuts in Republicans' mega domestic policy bill passed last year.

"If the state doesn’t step up, communities across California will crumble,” said Graham Knaus, CEO of the California State Association of Counties, in a statement Friday.

Some Democratic lawmakers struck a cautious tone while largely blaming President Donald Trump for withholding funds from Californians in need.

“California will not be able to fill the holes that have been left by the federal government,” said newly elected Senate President Pro Tem Monique Limón, a Santa Barbara Democrat, on Thursday. “We have to go back and look (at) what is feasible.”

'How big is the bubble?'Senate Budget Committee Chair John Laird, a Santa Cruz DemocratSen. John Laird, a Santa Cruz Democrat and the new chair of the Senate Budget Committee, warned that the high revenue projection indicates a bubble. Laird, who was elected to the state Assembly in 2002 after the 2000 dot-com bubble burst, said he’s concerned the AI-driven boom may not last.

“I think everybody agrees that this level of revenue can’t be maintained, but how big is the bubble? That’s probably the question,” he told CalMatters before Friday's release.

The Legislature must start chipping away at the long-term structural deficit this year instead of punting the problem, he said.

“We’re gonna have to do a piece of it,” he said. “We can’t go into next year with a $30 or $37 billion shortfall, because the reserves amount doesn’t get anywhere near that.”

Less funding for housing, homelessness 

Newsom’s final budget proposal represents a significant pull back of state spending on affordable housing. Every year since 2020, the state has tacked on an additional $500 million in spending to pad the federally funded Low Income Housing Tax Credit, the country’s premier funding source for affordable housing construction. This year’s spending plan includes no such proposal.

Newsom’s budget also slashes what had been a $1 billion infusion in spending for cities and counties to fund housing and services for homeless Californians to $500 million, “contingent on enhanced accountability and performance requirements” for local governments.

That all adds up to a more than 56% cut in overall spending for housing and homelessness.

“Not much in the way of good housing news,” said Ray Pearl, executive director of the California Housing Consortium, in a text message, though he stressed this was the first step in a half-year-long process.

In prior years, Newsom’s preliminary budget proposals have jettisoned such spending programs, only for the Legislature to add them back. Stephenshaw hinted as much in his presentation: “We'll obviously have conversations with the Legislature on what the appropriate level will be as we work through this process.”

The Governor's Budget Summary packet during the budget proposal presentation for the 2026-27 fiscal year, at the Capitol Annex Swing Space in Sacramento, on Jan. 9, 2026. Photo by Fred Greaves for CalMatters The counties association is hoping those conversations will lead to an increase in homelessness funding before the budget becomes final.

“We know it works,” Knaus said during a media briefing. “We know it has led to a significant reduction in homelessness in communities across California. And without those resources, that success that we have had is going to go away.”

Newsom has tussled with counties over homelessness funding for years as political pressure to resolve the state’s homeless crisis continues to mount. Newsom has blamed counties for failing to deliver results despite his $24 billion investment. Only a portion of the funding goes to county agencies and there is no dedicated annual funding to fight homelessness.

Newsom’s plan also startled county behavioral health service providers, who rely on Prop. 1 dollars for services.

“While these one-time bricks and mortar investments are promising, the $1 billion in funding for ongoing housing subsidies under Proposition 1 comes at the expense of redirected mental health treatment and prevention programs,” said Michelle Doty Cabrera, executive director of the County Behavioral Health Directors Association.

Medi-Cal a major challenge

Newsom’s budget includes $2 billion more this year and an additional $2.4 billion more next year on Medi-Cal, the state’s most expensive program that offers health care coverage for low-income Californians, primarily to respond to federal funding cuts.

The governor slammed Trump for passing a federal budget that could kick 1.8 million Californians off their insurance and raise the premiums for another 2 million. The state would have to spend at least $1.3 billion more than previously expected next year just to implement the federal law, the LAO previously estimated.

Assemblymember Mia Bonta, an Oakland Democrat who chairs the Assembly Health Committee, said the state must “use the bully pulpit” to fight the federal government, find ways to lower costs or even revive indigent care, a form of last-resort care that has largely become obsolete due to Medi-Cal.

“Because the alternative is, people are going to be dying on the streets,” Bonta said.

Bonta said the Legislature should explore new funding sources. Some advocates are already pushing for a pair of proposed wealth tax ballot measures to fund health care and education, which Newsom opposes.

“We need to think about ways that we can increase our revenue sources … (with) openness around looking at our tax structure,” Bonta said, adding that there are ways “to make sure that everybody’s carrying their fair share.”

CalMatters' Ben Christopher, Ana B. Ibarra Marissa Kendall, Carolyn Jones, Jeanne Kuang, Maya Miller and Mikhail Zinshteyn contributed to this report.

This article was originally published on CalMatters and was republished under the Creative Commons Attribution-NonCommercial-NoDerivatives license.

The Los Angeles County fires last year drove up insurance costs for many Californians. Now, a proposed settlement means some State Farm policyholders whose premiums rose won’t see additional increases, and others should even get refunds.

State Farm, the largest insurer in the state with about 20% market share, received approval for unprecedented emergency insurance rate increases in California last May. The company told the state that the billions of dollars it expected to pay out after the deadly fires placed it in financial peril.

The proposed deal among the state Insurance Department, consumer advocacy group Consumer Watchdog and State Farm, disclosed late last week, comes after months of public hearings convened by the insurance department and settlement talks.

Consumer Watchdog, which questioned the rate increases State Farm asked for, says the settlement saves the company’s California policyholders a total of $530 million. From the proposed settlement:

• Homeowners’ rate hikes will stay at the previously approved interim rate of 17% instead of the 30% the company sought.
• Condo owners who saw interim rate hikes of 15% will see their rates drop to an increase of 5.8%, and get refunds with interest dating back to June 1, 2025.
• Rental unit owners with interim rate hikes of 38% will see those increases drop to 32.8%, and receive refunds with interest. 
• Renter policyholders will see an increase of 15.65% vs. the interim rate hike of 15%.

In addition, State Farm has agreed not to cancel any new policies this year, and it won’t be canceling some policies it had planned not to renew in wildfire-affected areas. The insurance department characterized those provisions as important to the continued stability of the state’s insurance market, which has been beset with availability and affordability issues.

“When consumer advocates are able to challenge the data and present their own analysis, excessive requests are reduced and consumers are protected,” said Harvey Rosenfield in a statement. Rosenfield founded Consumer Watchdog and wrote Proposition 103, the voter-approved law that governs insurance in California.

State Farm has paid out more than $5 billion in claims from the L.A.-area fires so far, said spokesperson Tom Hartmann.

After consumer complaints and lawsuits, the insurance department is investigating the company’s handling of claims from the fires and expects results from that examination later this spring.

The agreement, which must be approved by an administrative law judge, also requires State Farm to undergo additional review of its rates in 2027. The company will be required to make a one time 2.5% premium discount available to renewing policyholders if its ratio of premiums to available cash reaches a certain level; Consumer Watchdog litigation director Will Pletcher said the deal will give the group more timely access to the company’s annual financial statements to help keep it accountable.

The insurance department expects the judge to decide on the settlement by April 7. Insurance Commissioner Ricardo Lara will then review the judge’s decision and have the final say.

This article was originally published on CalMatters and was republished under the Creative Commons Attribution-NonCommercial-NoDerivatives license.

Iran's state media issued what it said was a statement by Iranian Supreme Leader Mojtaba Khamenei, vowing to keep the Strait of Hormuz closed and keep up attacks on U.S. bases in the region, as the U.S.-Israeli war with Iran entered its 13th day.

It was purported to be the new leader's first statement since he succeeded his father Ayatollah Ali Khamenei, who was killed in an Israeli strike on the first day of the war.

The statement said Iran will avenge the blood of its "martyrs," including the victims of a March 1 attack on a girls school in the city of Minab, which Iranian officials say killed at least 165 people, many of them children. NPR has confirmed the U.S. military is investigating how it could have targeted the school.

The Iranian statement said the Strait of Hormuz, a key shipping route for a fifth of the world's oil supply, should remain closed. It said Iran continues to believe in friendship with its neighbors but will continue targeting U.S. bases in the region.

"The lever of blocking the Strait of Hormuz must undoubtedly continue to be used.," the statement said, according to an English version published by Tasnim News Agency, run by the Iranian Revolutionary Guard.

It's unclear if the statement was from Mojtaba Khamenei himself. Another person was heard reading out the remarks on Iranian state media, with a photo of Khamenei posted on the TV screen, as it was broadcast around the world.

There's been speculation about the leader's current condition and whereabouts. An Israeli official, speaking on condition of anonymity because they weren't authorized to speak publicly, told NPR that Khamenei was lightly injured early in the war.

This is a developing story that will be updated.

Here are other major updates about the conflict.

To jump to specific areas of coverage, use the links below:

Attacks on vessels | Oil stockpiles | Strikes across the Gulf | Israel-Hezbollah escalation | Iranian school attack

Two oil tankers hit in Iraqi waters

Two oil tankers were hit in Iraqi territorial waters near the southern port area of Basra, Iraqi officials said Thursday. It is the first oil-related strike reported in Iraq's waters during more than a week of war, in another sign of the conflict's escalation.

Iran, a critical ally of Iraq, took responsibility for attacking one of the tankers, which it said was owned by the U.S.

A port official said the attack targeted vessels near Basra's port approaches, and Iraq's security spokesman described it as sabotage.

Iraqi officials said one person was killed, and 38 crew members were rescued, with search operations continuing.

Iran has stepped up attacks on energy infrastructure and commercial shipping in response to U.S. and Israeli strikes, warning that the world should brace for oil prices to double.

— Jane Arraf

U.S. and allies to release record oil stockpiles  

The U.S. confirmed it will release 172 million barrels of oil from the Strategic Petroleum Reserve as part of a coordinated International Energy Agency (IEA) release of 400 million barrels from emergency stockpiles.

The U.S. contribution amounts to roughly 40% of the total, to be released gradually over about four months.

The IEA's executive director, Fatih Birol, said the goal is to keep the supply of oil flowing as the conflict disrupts shipping routes and energy infrastructure. But analysts warn stockpile releases can only partially offset prolonged disruption in the Gulf, where roughly a fifth of global oil consumption normally transits the Strait of Hormuz.

On Wednesday, President Trump said the price spike is temporary and said the reserve release would push prices down.

According to the popular app Gas Buddy, the current average cost of regular unleaded is now up to $3.61 a gallon.

- Camila Domonoske

Iran continues attacks on Gulf States

Countries in the Gulf reported new incoming threats and interceptions Thursday, as Iran continued firing drones and missiles across the region – including at U.S. military bases.

The UAE's defense ministry said air defenses were responding to Iranian missile and drone attacks, and that sounds heard in parts of the country were from intercepts.

Kuwait's defense ministry said its air defenses intercepted ballistic missiles and drones that penetrated the northern and southern parts of the country's airspace.

Saudi Arabia said it intercepted and destroyed drones headed toward the Shaybah oil field.

The United Nations Security Council adopted a resolution on Wednesday condemning Iran for recent attacks across the Persian Gulf region, calling them a "breach of international law" and "a serious threat to international peace and security."

- Rebecca Rosman

Israel launches large strikes on Hezbollah sites in Beirut after rocket fire into Israel

People inspect homes damaged by a projectile launched from Lebanon, in Haniel central Israel, on Thursday.

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The militant group Hezbollah launched its biggest rocket attack against Israel since the start of the war with Iran. The Israeli military said the Iranian-backed group fired heavy volleys toward northern Israel overnight into Thursday, triggering interceptions and sending residents repeatedly into shelters.

The Israeli military responded by launching more attacks against what it said were Hezbollah launch sites and command infrastructure.

Huge booms were heard across the capital and large black smoke billowed from the Dahieh neighborhood in south Beirut, while an attack in central Beirut – where thousands of people are displaced – killed 8 people and injured 31, according to Lebanese officials.

Wide evacuation orders for south Lebanon and Beirut's southern suburbs have displaced at least 800,000 people so far, according to the Lebanese government.

Lebanon, which does not have diplomatic ties with Israel, has unusually called for direct talks with Israel to end the escalating fighting with Hezbollah. Israel has not officially responded.

Israeli strikes on Iran have continued, with Iran firing missiles at Israel intermittently, including overnight.

Israeli military officials say about half of the missiles Iran has launched at Israel have carried cluster warheads, which spread out into smaller bombs over a wider area – increasing the risk to civilians.

- Daniel Estrin, Hadeel Al-Shalchi and Rebecca Rosman

Pentagon: Preliminary assessment suggests U.S. likely responsible for strike on Iranian school

The Pentagon has opened a formal investigation into the missile strike on an Iranian girls school that killed at least 165 civilians, many of them children, after a preliminary assessment suggested the U.S. was at fault, according to a U.S. official who was not authorized to speak publicly. The investigation is expected to take months and will include interviews with all those involved, from planners and commanders to those who carried out the strike.

If a U.S. role in the attack is confirmed, it would rank among the military's most deadly incidents involving civilians in decades. Congress created a special Pentagon office to prevent the accidental targeting of civilians but it was dramatically scaled back by Secretary of Defense Pete Hegseth soon after he took office last year.

"This investigation is ongoing. As we have said, unlike the terrorist Iranian regime, the United States does not target civilians," said White House spokesperson Anna Kelly.

The Pentagon did not respond to a request for comment.

NPR previously reported — based on commercial satellite imagery and independent expert analysis — that the strike was more extensive than initially reported and appeared consistent with a precision strike on a nearby military complex, raising questions about whether outdated targeting information contributed to the tragedy.

- Tom Bowman, Kat Lonsdorf, Geoff Brumfiel

Rebecca Rosman contributed to this report from Paris, Jane Arraf from Erbil, Iraq, Hadeel Al-Shalchi from Beirut, Daniel Estrin from Tel Aviv and Camila Domonoske, Tom Bowman, Kat Lonsdorf and Geoff Brumfiel from Washington.
Copyright 2026 NPR

The story first appeared on The LA Local.

If you’re a soccer fan — or just a fan of South Korean phenom Son Heung-min — you may have heard that the Los Angeles Football Club planned to put up a larger-than-life mural of the footballer in Koreatown last month. But the mural has yet to appear. 

LAFC planned to reveal the mural during the launch of their 2026/2027 jersey at The LINE Hotel. Now the reveal has been pushed back to sometime in June. 

The delay stems from issues with the city’s mural approval process, at least according to city officials. 

Gabriel Cifarelli, a spokesperson for the Los Angeles Department of Cultural Affairs, said they received a mural registration application for the site. But the department said it could not issue a notice to proceed because the application was “ineligible and incomplete” under the city’s mural ordinance and administrative rules.

“DCA staff offered the applicant advice and further guidance, and remains available for questions,” Cifarelli said. 

If a mural includes a team logo it is considered an advertisement and not original artwork, according to the city department. In that case, the permit must be issued through the city’s Building and Safety Department.

A new application has not been submitted through the mural program, Cifarelli said, and it was not immediately clear whether LAFC applied for a permit through the Building and Safety Department. 

LAFC spokesperson Danny Sanchez didn’t confirm if a new permit has been submitted.

“The mural unveil was rescheduled to June to better align with World Cup festivities,” Sanchez said. 

Dave Young Kim was commissioned to paint the mural and previously painted a Son mural on the side of the Crosby building in Koreatown in October, but that was only up for a few weeks.

He still plans to paint the mural on The LINE Hotel in June.

“I’m assuming at this point, LAFC is likely trying to line it up for a more opportune time,” said Kim. “The mural was originally supposed to line up with the launch of the new jersey so something similar.”

Leo Hernandez, 35, said he hopes the mural goes up before the World Cup.

“I didn’t know it was pushed back all the way to June,” he said. “I’ll be in Mexico for the World Cup.”

Hernandez, who goes by “El Soccer Guy” on Instagram and has nearly 50,000 followers, has been attending LAFC games since 2018. He said Son’s arrival to L.A. has brought a new wave of fans to the club.

“I’ve never seen so many Koreans,” he said. “He’s bringing a whole new community to LAFC. I don’t know if they love soccer or they love Son or both, but it’s amazing to see.”

“Son is starting to be my favorite on the team,” he added. “He’s so good. He wants the team to shine. And I love his positivity and energy.” 

The Marvel Cinematic Universe is all about people with superpowers living in a world very much like our own.

And there’s a lot of real Los Angeles mixed into the recent MCU series “Wonder Man,” now on Disney+, which makes for a version of the MCU that feels a little more grounded in reality, especially for Angelenos.

It's an action-comedy about two struggling actors also dealing with superhuman forces and secret government agencies. Think The Studio meets Agents of S.H.I.E.L.D.

Sir Ben Kingsley reprises his Iron Man 3 character Trevor Slattery, the messy British actor hired to play a bad guy called The Mandarin. And Yahya Abdul-Mateen II plays Simon Williams, aka Wonder Man.

Through their adventures trying to book the gig-of-a-lifetime while surviving the perils of the MCU, L.A. landmarks and cultural references abound, and ground the series in a relatability for many Angelenos, including lots of inside jokes for those working in the entertainment industry.

3 cultural references that make Wonder Man feel like real Los Angeles

Historic places, some we’ve had to part with

There’s a series of roughly 100-year-old small, independent movie houses used as locations in Wonder Man — the Eagle Theatre now home to Vidiots, Westwood's Village Theater now operated by American Cinematheque (with views of The Bruin Theater across the street), and the Highland Theatre which closed in 2024.

A scene from 'Wonder Man' on Disney +.

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Speaking of iconic L.A. spots breaking local hearts, the vintage bar within Echo Park’s Taix French Restaurant was used as an interior location for the series. Taix is closing at the end of the month to make way for new development.

“Taix, the Highland Park Theatre — these places that it was only three years ago were there,” Wonder Man showrunner Andrew Guest told LAist, “a lot of these establishments sadly, are not surviving. And this town is in a rough, rough place.”

(Though actor/director Kristen Stewart recently said in an interview with Architectural Digest that she bought The Highland Theatre and is restoring the building.)

L.A. traffic (especially around the Hollywood Bowl on a performance night)

Traffic is part of life in Los Angeles and with so many scenes shot in Hollywood, even the main characters of Wonder Man must experience that bumper-to-bumper frustration.

Though, because it is a TV show, they were able to indulge in the fantasy of beating that traffic in a way that in reality would be highly dangerous (and illegal).

“We got to shut down Sunset Boulevard for a little while to shoot a car going onto the sidewalk in front of the Palladium,” said Guest. And surprisingly, he explained, they didn’t have to shoot in the middle of the night to make the shot happen: “That was Friday night…. We didn't close all lanes of traffic. The street was open. We were shooting while Los Angeles was still going strong.”

The scene also references the frequent traffic back up during big shows at the Hollywood Bowl, even earning the show a social media repost of the scene from Chaka Khan.

Having family and friends 45 minutes away, who you rarely visit

Wonder Man includes an episode titled Pacoima where the main character visits his family and childhood home.

“My wife grew up in Chatsworth, and one of the things I found fascinating about her experience growing up there was that many of her friends and their families never went to Los Angeles,” said Guest.

“The idea that Simon grew up close to, but far enough away that Hollywood and Los Angeles did not feel like they were part of his life…so when he moved to the city, Pacoima is not a place he goes to a lot. And I feel like that's a part of L.A. that is true to this city. That doesn't get explored a lot and felt like it was another detail that we got to sort of throw into the show.”

There’s lots of other Southern California. references to enjoy from the Talmadge Apartments, an historic renaissance revival building on Wilshire Blvd., a mural of Danny Trejo, and even a cameo from Gisellle Fernandes, real-life L.A. broadcaster for Spectrum 1 News.

Should you get lost in the multi-verse, at least this L.A will be pretty familiar.

BONUS: Could there be a Season 2 of Wonder Man? And would it still be set in L.A.?

Guest couldn’t confirm anything about a possible Season 2, but told LAist, “It’s still on the table as an option, potentially."

As for whether a potential Season 2 would also film in Los Angeles and continue to highlight the city in new ways, Guest said it’s occurred to him that one of the best ways to write about Hollywood could be “ to send our show somewhere else because everybody in this town who's working has to move — whether it be Budapest or London or Ireland or Vancouver — very little is actually happening in this town. And that’s a story that I don’t think is being told right now about L.A.”

Season 1 of ‘Wonder Man’ is now streaming on Disney+.

Watch Julia Paskin's interview with actor/comedian X Mayo, who plays Simon Williams' agent in 'Wonder Man':