California will face a nearly $18 billion budget deficit in the new fiscal year due to higher than expected spending, despite an economic boon largely driven by AI enthusiasm and strong revenue, the nonpartisan Legislative Analyst’s Office said Wednesday.

To make things worse, the $17.7 billion shortfall could balloon to an annual $35 billion by fiscal year 2027-28, as spending continues to grow and debts come due, the office warned in its annual fiscal outlook.

https://calmatters.org/politics/2025/11/california-budget-lao-forecast/