The Brief

Facing a long horizon of budget deficits, California officials stretched and scrimped and massaged the numbers to stabilize the state’s finances last year. But an unforeseen economic downturn, spurred by President Donald Trump’s chaotic tariffs strategy, has knocked California out of fiscal balance once again.

Gov. Gavin Newsom is now forecasting a $16 billion, or 4%, decline in tax revenues in his revised budget proposal, according to a memo provided by his office in advance of the announcement Wednesday. That plan is the opening salvo in negotiations with the Legislature, ahead of the start of the fiscal year in July.

It’s a sharp turnaround from January, when Newsom projected a modest surplus in his $322 billion spending plan. The memo, which dubs the revenue shortfall the “Trump Slump,” does not provide an updated figure for California’s budget deficit.

“We are seeing the slow-rolling impact of 'Liberation Day' and it's not a good one,” spokesperson H.D. Palmer said. “Conditions have definitely changed for the worse since January, in significant part because of those federal tariffs.”

California’s financial picture was troubled even before the recent turmoil. Newsom and the Legislature took extraordinary steps last summer to close a budget gap projected in the tens of billions of dollars over two years, including by making sweeping cuts to state agencies and positions, clawing back funding increases for health care providers, eliminating affordable housing programs, delaying money for schools, suspending business tax credits and dipping into reserves.

And while tax revenues came in $6.8 billion above forecast through April, other problems were brewing.

A one-man 'wrecking ball' to California economy

Medi-Cal, the state’s health insurance program for low-income people, has reported a more than $6 billion cost overrun this year — in part because an expansion to include immigrants without legal status brought in more new enrollees than expected — and it needed an emergency cash infusion in March.

The devastating fires that hit Los Angeles in January also introduced new uncertainty for the budget, because the tax deadline for Los Angeles County — where a quarter of all Californians live — was delayed until October.

But the biggest risk is undoubtedly from Trump’s tariffs, which Newsom sued last month to block. Stock market declines are poised to take a bite out of future income tax revenue, because California relies disproportionately on capital gains earned by the wealthiest taxpayers; that accounts for $10 billion of the projected revenue decline. Higher costs from the tariffs are also imperiling major sectors such as manufacturing, agriculture, tourism and shipping in California, whose largest trading partner is China.

"It's one person that is taking a wrecking ball to our economy," state Senate President Pro Tem Mike McGuire, a Healdsburg Democrat, said last week during an event in Sacramento. "That is the existential threat to the state of California right now."

The grim outlook will almost certainly force more reductions to state programs, and legislative leaders will have their own ideas about what to target after Newsom puts forward his priorities today.

Bargaining will ramp up over the next month, with a June 15 deadline for the Legislature to pass a balanced budget or forgo its pay, though sometimes provisions of an overall deal drag out beyond that.

A binder showing Gov. Gavin Newsom’s revised budget proposal for 2023-24 during a press briefing at the state Natural Resources Agency in Sacramento on May 12, 2023.

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Rahul Lal

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CalMatters

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“Anyone who thinks we’re not going to make cuts this year is not in touch with reality,” Assemblymember Jesse Gabriel, an Encino Democrat who leads the Assembly budget committee, told CalMatters. “Advocates who are proposing major expansions of programs should stop wasting people’s time.”

One likely exception is a proposed $420 million annual increase of California’s film and television tax credit, more than doubling the pot of available subsidies and boosting the amount that individual productions can receive. It’s a priority for Newsom, with the strong backing of many Los Angeles-area legislators, especially as the region seeks a comeback after the fires.

Trump’s effort to slash federal spending is another looming question mark. Congressional Republicans have floated shifting more of the cost of social safety net programs to the states, though they are struggling to reach a budget agreement.

If they ultimately push through major changes to federal funding, lawmakers could be back in Sacramento later this year or early next year revising the state budget once again.

“Ninety percent of the ball game is in Washington,” Gabriel said. “It’s frustrating to me that this is beyond our control.”

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

NASA Administrator Jared Isaacman is blaming Boeing and his own agency for botching a test flight of the Starliner spacecraft, designed to take astronauts to and from the International Space Station.

A 311-page report details the issues that led to the failure of Starliner's first crewed test flight, which in June 2024 launched NASA astronauts Butch Willmore and Suni Williams to the International Space Station from Cape Canaveral Space Force station in Florida.

The duo's launch was initially a success — but as their Starliner spacecraft approached the station, multiple thrusters failed, hampering the crew's ability to steer toward the station and dock.

After months of deliberation, NASA and Boeing made the decision to send Starliner back to Earth without Wilmore and Williams on board. Instead, the astronauts remained on the space station and returned home nine months later — in SpaceX's Crew Dragon capsule.

In a news conference Thursday, Isaacman said the report classified the failure as a Type A Mishap — the highest classification for a mission failure. The Space Shuttle Challenger and Columbia accidents, along with the Apollo 1 fire, were also classified as a Type A Mishap. While those accidents resulted in the deaths of crewmembers, the Starliner mission was "ultimately successful in preserving crew safety," according to the report.

The report identifies the thrusters as a key technical issue leading to the failure, although an investigation is still ongoing and a root cause has not yet been found.

"Starliner has design and engineering deficiencies that must be corrected," said Isaacman. "But the most troubling failure revealed by this investigation is not hardware. It's decision making and leadership that, if left unchecked, could create a culture incompatible with human spaceflight."

He said those organizational and leadership problems were seen at both Boeing and NASA, Isaacman's own agency.

The report identified an erosion of trust between the two organizations and leadership that was "overly risk-tolerant."

Isaacman said that the more than 30 launch attempts for this mission led to "cumulative schedule pressure and decision fatigue." When discussing whether to return Wilmore and Williams in Starliner, Isaacman said the "disagreements over crew return options deteriorated into unprofessional conduct while the crew remained on orbit."

Isaacman said there would be "leadership accountability," but didn't offer any details.

"These are very complex programs, and complex programs like this fail in complex ways," said Don Platt, department head of aerospace engineering, physics and space science at the Florida Institute of Technology in Melbourne, Florida. "Those organizational issues are oftentimes, maybe even more important than the technical problems that they're facing."

Such a public scolding of NASA and one of its contractors by its own leader is uncommon, says Platt, who worked on the construction of the space station.

"I think it's really setting the stage for sort of the new way that NASA plans to do business here in his administration," says Platt.

He says that could mean greater transparency and oversight over NASA's contractors

Despite NASA's plans to decommission the space station by the end of the decade, Isaacman says he is still committed to flying Starliner. That would leave NASA with two options, Boeing and SpaceX, to fly astronauts to the station — something SpaceX already does with regularity.

The report offered 61 formal recommendations ahead of the next crewed Starliner mission.

"We're grateful to NASA for its thorough investigation and the opportunity to contribute to it," Boeing said in an emailed statement. "We're working closely with NASA to ensure readiness for future Starliner missions and remain committed to NASA's vision for two commercial crew providers."

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The Long Beach Unified Board of Trustees on Wednesday authorized the school district to end the employment of close to 600 employees, a move the LBUSD says is necessary to stabilize its ballooning deficit.

Board members approved two separate resolutions, the first of which does not renew the contracts of 515 certificated employees, who are on temporary contracts that must be re-upped annually. Though it is common for the district to choose not to renew some temporary contracts, the non-renewal of hundreds of TK-12 teachers, early childhood education teachers and social workers represents a massive change for the next school year from the current workforce of 10,000 total employees. While schools across the district will feel the cuts, Poly and Jordan high schools may be especially hard hit; 14 and 12 teachers at each site are listed on the district’s document of non-renewals.

The second resolution authorized the district to formally lay off 54 classified district positions: non-teaching staff members ranging from office support staff to instructional and recreation aides to library media assistants to parent liaisons.

The board votes come after months of warnings from the district that costs and spending have outpaced the district’s funding, saddling LBUSD with a $70 million deficit. The district is now attempting to shrink that deficit through a fiscal stabilization plan that “has prioritized preserving core instructional, wellness, and student support services,” the district wrote in an agenda item related to the cuts.

Prior to the vote, Superintendent Jill Baker framed the proposed cuts with the historical context of significant enrollment declines, the expiration of funds following the Great Recession and COVID-19 pandemic that had allowed the district to develop a healthy reserve, uncertain federal and state dollars and low attendance numbers, for which the district is penalized — “a really grave situation, fiscally,” she said, one that many districts across California are grappling with.

Baker walked board members through the significant efforts the district has made to manage costs, saving more than $47 million, including through significant central office reductions. Despite these efforts, it’s still not enough, Baker said.

“The release of temporary certificated contracts is one way of reducing the number of employees without impacting permanent certificated employees,” the district wrote in the agenda item.

For those 515 certificated employees who will be notified that their contracts will end, it’s a way that “the district can get away with letting teachers go without calling it a layoff,” said Peder Larsen, vice president of the Teachers Association of Long Beach, which represents certificated employees in LBUSD.

Some of them could be rehired, especially if their positions are in high demand, like science, math and special education teachers, Larsen said. Yet, it throws hundreds into a tailspin of uncertainty and fear, unsure if their jobs have definitively ended and how long they will have health coverage, he added.

While he said the district has not officially announced that no permanent certificated employees will be cut (they have until March 15 to do so), he said he is “reading the tea leaves” and predicting those permanent positions will be safe this year.

In his comment to the board during public testimony, Larsen advocated for examining the money spent annually on consultants and contracts and urged the board and district to re-examine their priorities and “choose to protect the people who serve students every single day.”

On both votes, School Board Member Maria Isabel López was the lone vote against the resolutions, voicing her opinion that some of these positions could have been saved if fiscal priorities had been different and major contracts had not been approved.

Other board members acknowledged that the votes will change lives. “There’s not one of us in this room that takes this lightly,” said Board President Diana Craighead before voting in favor of the cuts. Board Member Doug Otto said he was voting to adopt the resolutions “sadly, reluctantly and necessarily.”