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California Democrats were aware of a roughly $2 billion budget accounting error for months, even though Gov. Gavin Newsom’s January spending plan already projected a roughly $3 billion deficit for the coming fiscal year, according to a report.
The mistake, tied to the state’s public employee retirement system, CalPERS, could shrink that projected deficit. But state analysts warn California still faces far larger long-term budget problems, with annual deficits projected 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 did not publicly disclose it until it was reported in April, according to a memo reported by KCRA 3.
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Gov. Gavin Newsom speaks at a press conference at San Lorenzo High School as he signs an executive order to expand women’s access to capital and wealth-building opportunities on March 18, 2026, in San Lorenzo, Calif. (Tayfun Coskun/Anadolu)
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.
Together, the two errors total roughly $2 billion.
“Given the size and complexity of California’s budget, it is not uncommon that we come across errors stemming from calculation mistakes or formula errors etc.,” Legislative Analyst Gabe Petek said in a statement to KCRA 3. “Indeed, part of the role of our office is to serve as a check on the administration’s budget calculations.”
Petek said the issue is expected to be corrected in Newsom’s updated May budget proposal.
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A view of the California State Capitol Aug. 19, 2025, in Sacramento, Calif. (Justin…
