California Governor Gavin Newsom's progressive agenda may have to be scaled back or delayed due to the state's budget deficit. The state's finances are highly dependent on revenues from income taxes paid by its highest earners, and therefore subject to the ebbs and flows of the stock market, bonuses to executives, and initial public offerings. The COVID-19 stimulus funding boosted state income taxes, resulting in a surplus. However, the expected shortfall was predicted by economist Chris Thornberg. The wise course of action would have been to set the surplus aside and not spend it instead of dedicating it to one-time programs, Thornberg said.

The governor and lawmakers provided $9.2 billion in gas rebates to 32 million Californians, which, while temporary, was still costly. Newsom has repeatedly emphasized his decision to restrict most new spending to one-time funds. The revised budget closes a projected $32 billion budget shortfall while protecting investments in education, health care, public safety, housing and homelessness, and climate action. The Governor's budget prepares for continued economic uncertainty due to global economic issues while maintaining investments in Californian priorities. However, Newsom rejected calls to further subsidize public-transit operators, proposing a $2.2 billion reduction on transit infrastructure and no new funding for local public-transit providers.