California Faces $18 Billion Budget Gap as Leaders Weigh Deep Cuts

SANTA BARBARA, Calif. (KEYT) - State leaders are bracing for a multibillion-dollar challenge as California faces an estimated $18 billion deficit heading into the 2026–27 fiscal year.

Officials warn the gap could widen even further, with a long-term structural deficit of about $35 billion a year projected to begin in 2027–28.

Lawmakers believe the pressure is on to rein in spending while protecting essential programs.

When the Legislature reconvenes, budget committees are expected to restart negotiations immediately.

“When we come back into session, will begin to examine the governor’s budget. He’ll have the first opportunity to address his concern. The legislature will be working hard in collaboration to try and make sure we are operating in a fiscally, efficient manner, and taking great care of every tax payer dollar," said Assemblyman Gregg Hart.

Updates to the revenue forecast will guide the next round of discussions at the Capitol.