State controller warns CA’s spending outpaces revenue ahead of budget release
California’s long-term fiscal pressures, such as its healthcare and education expenses, are growing, State Controller Malia Cohen warned Tuesday, presenting an annual audit of the state’s financial positions.
It marked the first time in eight years that the annual financial report has been released before lawmakers and the governor finalize a budget for the upcoming fiscal year, the controller said.
Cohen’s remarks echoed recent warnings from other financial observers: California’s costs are increasing and though revenues are strong now, that might not always be the case moving forward.
“The question for California is no longer simply whether revenues are growing, it’s whether spending growth is becoming sustainable,” Cohen said during a press conference announcing the release of the state’s Annual Comprehensive Financial Report.
The financial report provides an audited look at the state’s financial position during the past fiscal year, which ended in June 2025.
Cohen celebrated the $596 billion in total revenue California collected primarily from personal income taxes during fiscal year 2024-25. But she emphasized that spending, particularly on long-term programs such as Medi‑Cal, the state’s health insurance program for low-income residents, is growing at a faster rate than revenue growth.
The nonpartisan Legislative Analyst’s Office recently reported that California’s General Fund spending has increased over $100 billion since 2019‑20. That growth was largely driven by increases to existing programs, such as spending on K‑14 education and Medi-Cal
The financial report comes just before the governor is expected to present a modified budget proposal for the upcoming fiscal year on Thursday.
Legislative leaders have presented revised budget proposals in recent weeks. Senate President Pro Tem Monique Limón released a plan that would restore billions of dollars for programs, including K-12 schools and homelessness assistance, that the governor previously proposed cutting.
The proposed reversal on those cuts is a result of California’s higher-than-expected revenue from tax collections, which has largely been driven by the growing artificial intelligence industry and a successful stock market, the LAO reported last week.
Cohen did not offer lawmakers specific advice on how to address the state’s structural deficit, but she did encourage the Legislature to be “mindful of the allocation of tax dollars.” She warned against passing a budget that is temporarily balanced, but later results in a deficit because expenditures outpace revenue.
“We just need to be cautious and judicious,” Cohen said. “The markets are very volatile, and it is hard to gauge what future revenue is going to be when coming into the state of California.”
A review of the publication dates of the past financial reports found that the last time the controller’s office published a previous fiscal year’s report before the governor’s May revision was in March 2018, when the Controller’s Office was under the leadership of Cohen’s predecessor, Betty Yee.
Cohen, who took office in 2023, said that the controller’s office and other state agencies had previously blamed one another for delays in releasing the reports. She said her office prioritized completing this report on time so the Newsom administration and the Legislature would have an audited financial report when making budget decisions.
Cohen is currently running for reelection. She faces two opponents, Meghann Adams and Herb Morgan, in the June primary.
