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.

Want more Olympics updates? Get our behind-the-scenes newsletter for what it's like to be at these Games.

It's the Winter Olympics, that special season every four years in which everyone you know is suddenly an expert on luge strategy and curling technique from the comfort of their couch.

There's plenty to dive into this year, at the unusually spread-out Milan Cortina Olympics.

Hundreds of athletes from around the world — including 232 from the U.S. — will descend on over two dozen venues across northern Italy to compete in 16 different sports. There are 116 medal events on the line throughout the 2 1/2 weeks. And this time, unlike the COVID-era 2022 Beijing Winter Games, spectators will be allowed to watch in person.

But you don't have to board a plane or sport hand warmers to get a good view, thanks to NBC's robust broadcasting rights and NPR's scrappy team of journalists on the ground. Here's how to follow the action — and peek behind the curtain — from home.

How to watch the opening ceremony

The Feb. 6 opening ceremony marks the official start of the Games (even though several sports, including curling and ice hockey, start competing two days earlier).

It will be held primarily at the historic San Siro Stadium in Milan, featuring performances by icons like Mariah Carey and Andrea Bocelli, as well as traditional elements like the Parade of Nations and the lighting of the Olympic cauldron.

But there will also be simultaneous ceremonies and athlete parades at some of the other venues — scattered hundreds of miles apart — and, for the first time in history, a second Olympic cauldron will be lit in the co-host city of Cortina d'Ampezzo.

NBC's live coverage of the opening ceremony (also streaming on Peacock) will begin at 2 p.m. ET on Friday, Feb. 6, with a prime-time broadcast planned for 8 p.m. ET the same day.

How to keep up once the Games begin

There are 16 days of competition between the opening and closing ceremonies, with contests and medal events scattered throughout, depending on the sport. Here's the full schedule (events are listed in local time in Italy, which is six hours ahead of Eastern time).

NBC says it will broadcast events live throughout the day, with a nightly prime-time highlights show at 8 p.m. ET, followed by a late-night version.

U.S.-based viewers can watch on NBC, Peacock and a host of other platforms, including the apps and websites of both NBC and NBC Sports. Seasoned Olympic viewers will recognize Peacock viewing experiences like "Gold Zone" (which whips around between key moments, eliminating the need to channel surf) and "Multiview," now available on mobile.

The Feb. 22 closing ceremony will be broadcast live starting at 2:30 p.m. ET, and again on prime time at 9 p.m. ET.

It will take place at a historic amphitheater in Verona, which will also host the opening ceremony of the Paralympics on March 6. Some 600 Para athletes will compete in 79 medal events across six sports — including Para Alpine skiing, sled hockey and wheelchair curling — before the closing ceremony in Cortina on March 15.

How to follow NPR's coverage

All the while, you can check out NPR's Olympics coverage to better understand the key people, context and moments that make up the Games.

NPR's five-person Olympics team will bring you news, recaps and color from the ground in Italy, online, on air and in your inbox. Plus, expect updates and the occasional deep dive from NPR's journalists watching from D.C. and around the world.

You can find all of NPR's Winter Olympics stories (past, present and upcoming) here on our website.

To listen to our broadcast coverage, tune to your local NPR station and stream our radio programming on npr.org or the NPR app.

Plus, subscribe to our newsletter, Rachel Goes to the Games, for a daily dose of what it's like to be there in person.

We'll also have a video podcast, Up First Winter Games, to further dissect the day's biggest Olympic stories and oddities. You can find it on NPR's YouTube page.
Copyright 2026 NPR

Californians could get instant rebates on electric vehicle purchases under Gov. Gavin Newsom's $200 million plan, which would require automakers to match state incentives dollar-for-dollar.

The plan, which the Legislature must still approve, lays out for the first time how the governor plans to steer a California-specific rebate program to bolster a slowing electric car market after the Trump administration cancelled federal incentives last year.

The California Air Resources Board would oversee the program, offering rebates at the point of sale to lower upfront costs for buyers instead of reimbursing them later. The draft does not specify rebate amounts, which the air board will determine during program design and discuss at a public workshop this spring, said Lindsay Buckley, a spokesperson for the agency.

The proposal exempts the program from the state’s usual rule-making requirements, allowing California to design and launch the rebates more quickly than typical for new programs.

Newsom first unveiled the incentive proposal as part of his January budget plan but released few initial details. State officials cast the subsidy as a response to President Donald Trump’s dismantling of incentives and blocking of California’s clean-vehicle mandate.

How the rebates would work

Outside experts and clean vehicle advocates said the details raise new questions about how the program would work in practice and who would benefit.

Ethan Elkind, a climate law expert at UC Berkeley, said structuring the incentives as grants allows the state to set the terms automakers must meet to access the money, giving California leverage over manufacturers.

But Mars Wu, a senior program manager with the Greenlining Institute, which advocates for investments in communities of color, said the draft plans fall short on equity, arguing the proposal does little to ensure the incentives reach the Californians who need them most.

“[The] proposal sets up a first-come, first-serve free-for-all scenario, which is not a prudent use of extremely limited public dollars in a deficit year,” she wrote in an email.

How far could the money go?

The proposal limits eligibility by vehicle price, not buyer income. New passenger cars qualify only if priced at or below $55,000, while vans, SUVs and pickup trucks are capped at $80,000. Used vehicles are limited to a sales price of $25,000. All vehicles must be registered to California residents.

The newly released details also add context about the size of the program. A CalMatters estimate of the governor’s initial proposal found that the $200 million would cover rebates for only about 20% of last year’s electric vehicle sales.

The proposed matching funds from auto manufacturers could allow the program to cover a larger share of buyers or provide larger point-of-sale rebates, depending on how the incentives are structured.

One clean car advocate said the details aren’t locked in yet — including how the rebates could be targeted. Wu said the state could move quickly without abandoning equity by deciding who qualifies in advance while still offering rebates at the dealership. “There is a way to balance equity and expediency,” Wu wrote.

On a clear January day about a week ago, California water resources engineer Jacob Kollen jammed a blue Mt. Rose sampler deep into the snow at Phillips Station, near Lake Tahoe in the Sierra Nevada.

The second California Department of Water Resources survey of the season showed the snow was 23 inches deep, with a snow water equivalent (the amount of water contained) of eight inches. That’s just 46% of average, an alarming fall from the 89% of average seen at the beginning of the month.

These are crucial measurements to watch, as the snowpack is California’s most important reservoir. As snow melts throughout the year, it provides residents, agriculture and the state’s vast landscapes with much-needed moisture.

Our wet season began with quite a strong showing of rain, but a dry January coupled with warm weather has set California off in the wrong direction.

“ Statewide, we were better off last year than we are at this point,” said David Ricardo, the Department of Water Resources hydrology section manager, during a news conference about the snow survey results. “Something to be cognizant of, especially if we can make up more ground in the northern and central part of the Sierra Nevada.”

California's snowpack is at 56 percent of normal as of February 3, 2026.

(

California Department of Water Resources

)

As of Tuesday, the statewide snowpack is at just 56% of normal for this date, with the southern Sierra doing the heavy lifting at 74%. The central and northern portions are at 56% and 43% respectively.

For now, California reservoirs are well stocked, and drought conditions have been rained away, according to the U.S. Drought Monitor. However, our snow water totals are just about in line with what we saw in 2012, the beginning of a catastrophic drought period.

Over in the Colorado River Basin, which supplies Southern California with about 20% of its water, snowpack is at about 64% of normal.

“ There's no way to sugarcoat it,” said Kathryn Sorensen,  director of research at the Kyl Center for Water Policy at Arizona State University. “ I've been doing Colorado River stuff for 25 years. This is the worst I've seen.”

In the upper basin, the snow water equivalent is lower than it was in 2002 — a period of time so alarmingly dry that seven states and Mexico came together to hash out how to manage Colorado River water. The agreement, which has been in place since 2007, is set to expire at the end of 2026.

Because California enjoys senior water rights, it’s unlikely that the state will see Colorado River cuts for the next couple of years, Sorensen said. Arizona, however, will.

The Climate Prediction Center is forecasting below average precipitation across much of California through the end of the state's rainy season.

(

Climate Prediction Center

/

National Oceanic and Atmospheric Administration

)

Where will things go from here?

Experts are eyeing April 1, which is usually when the snowpack reaches its apex. If we manage to get a few sizable snowstorms by then, we should be sitting pretty heading into the dry months.

NOAA’s Climate Prediction Center is forecasting likely above average precipitation over the next few weeks for California. Over the next several months though, forecasts are for below-normal precipitation with elevated temperatures.

Longer term, higher temperatures as a result of climate change can cause more precipitation to fall as rain rather than as snow, and for snow on the ground to melt faster. Warming air temperatures dry out soils and vegetation more quickly, too, meaning even an average amount of precipitation may not be enough for some ecosystems. Overall, snowpack could decline by more than 50% by the end of the century, according to California's Fourth Climate Change Assessment.