California Democrats have been aware of a nearly $2 billion budget accounting error for months, even though Gov. Gavin Newsom’s January spending plan projected a nearly $3 billion deficit for the upcoming fiscal year, according to a report.
A blunder involving CalPERS, the state’s public employee retirement system, could reduce projected losses. But state analysts warn that California still faces much bigger long-term budget problems, with annual deficits estimated at $20 billion to $35 billion.
State legislative leaders learned about the problem as early as February after it was flagged by the nonpartisan Legislative Analyst’s Office but didn’t publicly disclose it until a report in April, according to a memo reported by Kcra 3.
House Committee Launches ‘Rampant’ Investigation of California Hospice Fraud
Governor Gavin Newsom speaks during a press conference at San Lorenzo High School as he signs an executive order expanding women’s access to capital and wealth building opportunities on March 18, 2026 in San Lorenzo, California.
(Getty Images)
The analyst’s office said Newsom’s administration double-counted some retirement contribution rates, creating a $1.6 billion error.
Another miscalculation involving future contribution estimates added another $450 million.
Read on the Fox News app
Together, the two errors totaled $2 billion.
“Given the size and complexity of California’s budget, it’s not uncommon that we find errors resulting from calculation mistakes or formula errors, etc.,” legislative analyst Gabe Petek said in a statement to KCRA 3.
Petek said the issue is expected to be corrected in Newsom’s updated May budget proposal.
New exposé claims California lost at least $180B to fraud under Gavin Newsom
A view of the California State Capitol on August 19, 2025, in Sacramento, California.
Newsom’s administration has disputed what the lawsuit characterized as an error, saying the adjustment reflects a change in the way the state estimates pension-related payments.
“This is not a calculation error. This is a revision to better estimate how these payments will be made,” Finance Department spokesperson HD Palmer told the outlet.
The lack of public disclosure has drawn scrutiny after MPs issued public warnings of budget shortfalls while internal affairs continued.
In a January overview of the governor’s budget, the Office of the Legislative Analyst estimated the administration would have a $2.9 billion deficit for 2026-27, and warned the state would face multiyear deficits of $20 billion to $35 billion annually.
California Governor Gavin Newsom delivers his final State of the State address at the Capitol Building on January 8, 2026 in Sacramento, California.
The office called those long-term deficits “appalling” and raised serious concerns about California’s fiscal sustainability.
The same report said the governor’s budget is only “roughly balanced” due to high revenue projections, while warning that a possible stock market downturn could cut income tax revenues sharply and put the state on further uncertainty.
Click here to download the Fox News app
Lawmakers are expected to move negotiations forward when Newsom releases his revised budget next month.
Fox News Digital has reached out to the governor’s office, the Department of Finance and the Legislative Analyst’s Office for comment.
Original article source: Newsom administration allegedly knew about $2B California budget error for months: report
