Gov. Gavin Newsom's final California budget is also his largest — and a fitting bookend to a tenure defined by both soaring spending and recurring fights over how to pay for it.

A farewell spending plan

Newsom signed the 2026-27 budget just ahead of the July 1 fiscal-year deadline, a spending package of about $351 billion in total funds — roughly 40 percent larger, adjusted for inflation, than the budget he inherited when he took office in January 2019, CalMatters reported. (The figure covers all state funds, including federal pass-throughs and special funds, rather than the narrower general fund.)

Balancing it required three new revenue measures — an extension of the tax on health insurers, a cap on corporate tax credits, and a new sales tax on certain software products beginning in 2027 — together projected to raise about $5 billion a year.

Cuts proposed, mostly rejected

Newsom had come to the table seeking significant reductions to close a structural gap left by a string of multibillion-dollar deficits, including withholding billions in school funding, cutting thousands of child care slots, and imposing new Medi-Cal asset tests. The Legislature rejected or delayed most of them. The final deal restored money for K-12 schools and community colleges, preserved the In-Home Supportive Services program for elderly and disabled residents, delayed cuts to Medi-Cal coverage for undocumented immigrants by a year, roughly doubled the governor's homelessness allocation to about $900 million, and committed to thousands of new subsidized child care slots.

"Stop drastic cuts to safety net programs that millions of Californians rely on," is how Senate President Pro Tem Monique Limón framed the chamber's posture.

A structural warning

The nonpartisan Legislative Analyst's Office offered a cautionary note: California's revenue, it warned, "rests disproportionately on AI-driven equity valuations," leaving the state "ill-prepared for even a slip up in revenues." It is a familiar vulnerability — a small slice of top earners supplies an outsized share of income-tax receipts, tying Sacramento's fortunes to the stock market. To hedge, the budget sets aside billions in reserves earmarked for the following fiscal year.

Governing for a successor

The negotiation was shaped by Newsom's status as a lame duck. Barred from a third term and widely expected to run for president in 2028, he was seen by lawmakers as winding down his governorship — which, CalMatters noted, gave them leverage to resist politically unpopular cuts. The budget also absorbed the fiscal shadow of Washington, with the state forced to eliminate roughly $2 billion in education contracts after federal grant pullbacks.

Newsom leaves office in January 2027. The budget he leaves behind — bigger, more contested and more dependent on a narrow band of high earners than the one he inherited — will be among the first challenges for whoever succeeds him.