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.

Some government funding streams for L.A. County’s public health system are drying up, and officials are turning to private philanthropy to fill the gap.

A new privately funded foundation launched Thursday to strengthen public health services after $50 million in federal, state and local funding cuts to the county’s Department of Public Health since early last year.

“It is really a hard day for our community when we have to ask for private donations to fund a public good, but unfortunately, we've lost too much money to not take this important step,” said Public Health Director Barbara Ferrer.

In February, the county’s Public Health Department closed seven clinics, with six remaining open. About half of the patients seen in those clinics are uninsured, according to county officials. The department also cut hundreds of staff positions.

Ferrer is on the board of the new foundation, The Fund for Advancing Public Health LA, which held its first meeting Thursday.

She said the fund will help the county maintain its basic public health infrastructure, including disease prevention, health promotion, environmental health, and emergency response efforts.

Other board members include several health insurance executives, as well as actors Sean Penn and Danny Trejo. Board member Saree Kayne of the R&S Kayne Foundation pledged $150,000 to the fund Thursday. Kayne said she hopes the donation encourages others to give.

The foundation aims to raise $2 million this year.

More cuts expected

L.A. County Supervisor Holly Mitchell said it’s crucial to have an alternative funding stream to protect services for the county's most vulnerable residents.

“We are saving public health,” Mitchell said. “This fund represents a new approach, one that brings together government philanthropy in the private sector to invest in community-based solutions, protect vulnerable populations, and strengthen our public health infrastructure.”

Officials say more public health cuts are coming, through the federal budget law known as the "Big Beautiful Bill," which slashes funding for Medi-Cal.

The county Department of Public Health anticipates losing up to $300 million in revenue over the next three years because of the federal budget bill and other potential funding freezes. Federal funding accounts for almost 50% of the public health budget, according to county officials.

Mitchell also led an effort to put a half-percent county sales tax increase to fund public health on the June ballot.

If approved by voters, that proposal, known as Measure ER, is expected to raise about $1 billion a year for county safety net health services, including about $100 million for the public health department.

Board members

The Fund for Advancing Public Health LA announced its founding board of directors, which includes:

• Dr. Barbara Ferrer, LA County Department of Public Health director
• Debbie I. Chang, Blue Shield of California Foundation CEO
• Sean Penn, actor and co-founder of Community Organized Relief Effort (CORE)
• Martha Santana-Chin, LA Care Health Plan CEO
• Saree Kayne, R&S Kayne Foundation CEO
• Danny Trejo, actor and restaurateur
• Jarrett Barrios, an executive at the American Red Cross
• Dr. Deborah Prothrow-Stith, Charles R. Drew University College of Medicine Dean
• Kristin McCowan, an executive at the Los Angeles Dodgers

The Rose Bowl in Pasadena may be a centenarian, but it’s holding up pretty well as it continues to host events on its way to a starring role in the LA28 Olympics.

But before it can host the soccer final, it needs fixes, especially to the infrastructure serving the bathrooms and drinking fountains. Fears of a toilet backup while in the world’s spotlight led Rep. Laura Friedman to seek federal funds for upgrades. On Thursday she announced she secured just over $1 million.

“Two years from now, athletes around the world are going to compete for gold right where we are standing. This is not the time to find out whether or not these pipes are up to the task,” Friedman said.

The planned work, she added, will lead to improved water flow capacity and water drainage, eliminating the risk of backups and emergency maintenance.

The funds came from the House of Representatives Interior and Environment subcommittee. The fixes, an official said, will be completed by the LA28 Olympics.

The funds, however, are a drop in the bucket when it comes to what’s needed to make needed improvements to the Pasadena venue.

Officials, including (left to right) Rose Bowl Legacy Foundation President Dedan Brozino, Deputy Fire Chief of the City of Pasadena Tim Sell, Congresswoman Laura Friedman, and Rose Bowl Stadium CEO Jens Weiden announced infrastructure funding for the 103-year old Rose Bowl.

(

Adolfo Guzman-Lopez/LAist

)

“Over the  next 20 years there's about $200 million that we need to put in and that's everything from updating light fixtures to updating gas, water, wastewater lines, etc.,” said Dedan Brozino,  president of the Rose Bowl Legacy Foundation, the nonprofit that supports the Rose Bowl stadium's preservation and enhancement.

Getting venues ready will be expensive

The money is a much-needed win at a time when elected officials in city, county, state and federal offices have been struggling to find the funds to get L.A.-area venues ready for the global Olympic stage in two years.

The entrance to a men's bathroom at the Rose Bowl.

(

Adolfo Guzman-Lopez/LAist

)

A $360 million proposal to spruce up asphalt in parking lots around Exposition Park won’t be done in time for the Olympics, as originally planned. Meanwhile, just up the street, there’s concern that a $2.6 billion expansion of the L.A. Convention Center, which is hosting Olympic wrestling, fencing and judo in 2028 won’t be ready for the Olympics.

Additionally, to save money, LA28 organizers moved Olympic diving to the Rose Bowl complex last year because it has two Olympic-sized pools, while the Exposition Park complex doesn't and would need expensive upgrades.

Topline:

About the chick: The chick hatched March 14. The zoo opened its Cape vulture enclosure in February 2025 after years of planning to encourage the birds to roost and nest, welcoming a new breeding pair that year. When it grows to be an adult, it’ll have a wingspan of 8 1/2 feet.

About the enclosure: The L.A. Zoo said it spent years developing the vulture habitat, which was designed to mimic the vultures’ natural environment in South Africa and nearby countries. Dominick Dorsa II, the zoo’s director of animal care, said in a statement the successful hatching is “a testament to the design and construction” of the habitat.

How to see the chick: You can’t for the time being. Zoo officials are keeping it away from visitors until the chick matures, though you can still see adult Cape vultures at the zoo’s enclosure.

Though visitors will have to wait until the chick matures to see it in the enclosure, you can still take in the impressive eight and a half foot wingspan of the adult Cape vultures.

(

Courtesy Jamie Pham/L.A. Zoo

)

What zoo officials are saying: “Welcoming a Cape vulture chick is a thrilling moment for our team and a beacon of hope for African vultures,” the L.A. Zoo’s curator of birds Rose Legato said in a statement. “Vultures are one of nature's most misunderstood marvels, and I cannot wait for our guests to eventually watch this chick grow and learn just how vital they are to our ecosystems.”

About the species: Cape vultures are listed as a vulnerable species due to human activities and encroachment. According to the L.A. Zoo, African vultures are more closely related to eagles and hawks than vultures native to the Americas, like the zoo's California condors that hatched last year.

This story first appeared on The LA Local.

What should have been a celebration for formerly incarcerated youth completing a reentry program at the Boyle Heights Arts Conservatory (BHAC) last week instead ended with seven students and two staff members detained by the Los Angeles Police Department, according to witnesses. 

Now, nearly a week later, BHAC staff and city officials are demanding answers from the LAPD, with some accusing officers of racial profiling. 

According to the LAPD, officers observed a large group gathered on the corner of Cesar E. Chavez Avenue and Mott Street around 4:16 p.m. on March 26. Authorities then requested backup for what they described as “a large group surrounding officers,” LAPD Public Information Officer Tony Im said. 

The group, classified by police as an “aggressive gang group,” consisted of seven 18-year-old students from the BHAC’s Bridge Academy Movement (BAM) program and two BHAC staff members.

The BAM program pays formerly incarcerated youth to complete 200-250 hours in media and visual arts training to prepare them for creative careers. That day, students were set to showcase their work at the BAM program graduation for families and community members. 

Rene Weber, a teaching artist at the BHAC, had been with the students setting up for the ceremony minutes before the incident occurred. 

According to Weber, the students had gone to coffee across the street at Milpa Kitchen as they often did, when staff were alerted that they were being detained. 

Weber said he arrived to find students and a staff member pressed against the wall in handcuffs. 

Video from the scene, taken by a staff member at the BHAC, shows multiple officers surrounding the group. At one point, an officer orders a person to “get on the wall” and displays a stun gun.  

“No, none of that, these are kids right here,” the staff member replies.

Another staff member, Teotl Veliz, recorded a large police response.  

“I counted 12 cop cars, that’s at least 25 cops, and they had a helicopter,” Veliz said. “It was just so comedic, tragically comedic, that it was on their graduation day too.”

Officers established a perimeter with yellow tape along the side of Ashley’s Beauty Salon as local business owners and witnesses gathered around the students. 

“I was just incredibly disappointed in LAPD… because it became so apparent to everybody, all at the same time, that it was racial profiling and nothing else,” Veliz said.

Weber said officers gave shifting explanations for the stop at the scene, including blocking the sidewalk and possible underage vaping. After Weber told the officers that all of the students were 18, they said they would investigate whether the group had any gang affiliation. 

Police have not responded to questions about what led officers to believe that the group was gang-affiliated. 

Weber recalled pleading with the officers to let the group go and explaining to them that they worked across the street. Community members and local business owners also stepped in to vouch for the students. 

“Our job is to help them gain a new perspective on life,” Weber said. “They’re coming out of juvenile detention and they’re turning their lives around. We can do our part in keeping them off the streets and keeping them doing better but what does it mean if they’re going to be profiled and treated exactly the same way?” 

In total, seven 18-year-old students and two staff members were detained. BHAC staff said one student and one staff member were taken to Hollenbeck Community Police Station and released less than two hours later after advocacy from community members and Councilmember Ysabel Jurado.

The incident ultimately resulted in an infraction for smoking a cannabis e-vape on a public sidewalk, according to a photo of the infraction shared with the Beat. LAPD did not provide details about the people taken to Hollenbeck Station or the infraction. 

The graduation ceremony was cancelled that night and is expected to be rescheduled in April. 

“Graduation should be a moment of pride and possibility — not fear,” Jurado said in a statement. “I’m seeking answers about what occurred, and this underscores the need for stronger relationships between law enforcement and community organizations so moments like these are protected, not disrupted.”

Carmelita Ramirez‑Sanchez, the conservatory’s executive director, said she was grateful to the community and Jurado for advocating for the students’ release. Jurado met her at Hollenbeck Station within 20 minutes of being alerted to the incident, she said. 

“They had store owners, señoras, barbers, that ran out and were trying to explain to the police who our kids were,” Ramirez‑Sanchez said. 

Still, she said the incident tarnished what should have been a joyous celebration.

“I imagine that what this does is derail this entire idea that you can be an active participant in your own restorative growth,” she said.