Newsom predicts smaller budget shortfall than state agency

(The Center Square) – In his proposed budget, California Gov. Gavin Newsom is predicting a shortfall of $2.9 billion. That's much less than the $18 billion shortfall projected by the Legislative Analyst's Office. Newsom, who released his 2026-27 budget Friday, expects much higher general fund revenues than the LAO, a nonpartisan agency. The Democratic governor’s proposed budget estimates that general fund revenues will exceed $42 billion over the 2025 budget, fueled mainly by higher cash receipts, higher stock market levels and an improved economic outlook. “The biggest difference in the factors and forecasts is that the LAO incorporated significant risk of a stock market downturn in their forecast,” Joe Stephenshaw, the director of the California Department of Finance, said during a news conference announcing the governor’s budget. “We do not do that. "We don’t build in downturns into our forecast," Stephenshaw told reporters Friday at the Capitol in Sacramento. "We do know that if th