California Governor Proposes Budget With 7.5 Percent Spending Increase

The total proposed budget reaches $349.6 billion compared with $297.9 billion enacted for the current year. The plan includes a projected $16.5 billion in revenue from sales of stock in artificial intelligence companies. Officials also proposed a tax increase on software products sold electronically and a cap on tax credits for companies at $5 million or 50 percent of their California tax liability.

The proposal contains one mentioned reduction in health care coverage for illegal immigrants through the state's Medi-Cal program. No other significant expenditure cuts were identified in the plan. The budget does not address projected revenue shortfalls from residents leaving the state.

Officials estimated that the top 1 percent of earners contribute 40 to 50 percent of individual income tax revenue each year.

The nonpartisan Legislative Analyst's Office has identified a long-term structural deficit for the state. The current proposal follows a period that included a $97.5 billion surplus in the 2022 fiscal year and subsequent deficits totaling $125 billion over four years.

The budget maintains the requirement for an annual balanced budget through accounting measures that address the structural shortfall.