Press Releases

SACRAMENTO — For the first half of the state’s fiscal year, California State Controller Malia M. Cohen’s December Cash Report shows both General Fund revenues and expenditures have exceeded budget estimates, prompting Controller Cohen to advise budget leaders that deficits are expected to continue and will likely grow if the state continues status-quo spending and borrowing.
 
“Our latest cash update shows that receipts for the fiscal year through December exceeded the 2025-26 Budget Act estimate by $11.2 billion, or 10.8 percent. At the same time, spending was higher than expected by $5.9 billion, or 4.6 percent which is a reminder that strong revenues alone do not resolve our underlying future year budget gaps,” stated Controller Cohen. “As the State’s Chief Fiscal Officer, we need to be mindful that any increase in spending on new programs, paired with revenue volatility may increase the size of future deficits. As the Governor and Legislature do the heavy lifting together to negotiate a new spending plan, I urge them to take a disciplined approach to the state’s finances that rebuilds reserves as the Governor outlined in his State of the State Address, keeps borrowing in check, and prudently spends taxpayer dollars. This approach will best position California to tackle deficits and weather future economic challenges.”

For the fiscal year through December, personal income tax receipts came in above projections by $9 billion, or 15.7 percent. Corporation tax collections were $46.7 million below estimates, or 0.3 percent, and retail sales and use tax receipts were $55.4 million below projections, or 0.3 percent.

As of December 31, the state had $86.1 billion in unused borrowable resources in its special funds. These internal funds are available for short-term General Fund use in order to manage cash deficits related to the timing of revenue collections. While any cash-flow borrowing is repaid to not affect special fund operations, Controller Cohen cautioned against relying on internal borrowing to address budget gaps, warning that overuse can increase future liabilities and weaken reserves needed to avoid deeper cuts during an economic downturn.
 
As shown in the summary chart below, the Budget Act expects an ongoing gap of spending outpacing revenues: