Gov. Newsom says poverty, homelessness 'poster child' of California's failures
Gov. Gavin Newsom said during a podcast interview that homelessness and poverty are the "poster child" for the state's failures on Wednesday.
California used to be the place where people went to chase dreams. Today, it’s the place where fiscal discipline goes to die. The Golden State, which is home to Hollywood glitz, Silicon Valley billionaires and the highest state taxes in America, is broke again. It's staring down another multibillion-dollar deficit that exposes just how unstable and dysfunctional its financial model has become. In short, the Golden State isn’t so golden anymore.
For years, politicians like Democrat Gov. Gavin Newsom have insisted that California is the shining example of fiscal sensibility that America should follow. But when you peel back the layers, what you really find is a state government that can’t stop spending, can’t plan for the future and is now caught in a structural budget crisis of its own making.
The warning signs are flashing red
This year, California’s nonpartisan Legislative Analyst’s Office (LAO) dropped a bombshell: the state is now projected to face an $18 billion deficit in 2026–27, a shortfall $5 billion worse than what lawmakers admitted just months earlier. Even more troubling, the LAO says California is facing structural deficits of $15 to $25 billion every year through at least 2029.
This isn’t a one-off crisis for California. It’s a multiyear budget mess that keeps getting deeper. And this is happening during strong stock-market years when capital-gains tax revenue is already at record levels. Imagine what happens when the market cools or when we hit a mild recession.
California Gov. Gavin Newsom speaks at the 2025 New York Times DealBook Summit in New York City on Dec. 3, 2025. (Michael M. Santiago/Getty Images)
How did the state with the most millionaires end up broke?
California’s problem is simple:
- When the money comes in, politicians spend it.
- When the money slows down, they spend even more.
Rather than tightening belts or prioritizing necessities, lawmakers have layered on new programs, expanded benefits and made long-term promises based on temporary revenue spikes. Newsom and legislative leaders have hailed these expansions as "investments," but the truth is they are obligations that don’t disappear when the economy dips.
NEWSOM CALLS HOMELESSNESS AND POVERTY 'POSTER CHILD' OF CALIFORNIA'S FAILURES AS A STATE
Some of the biggest drivers of the fiscal crisis include:
- Massive increases in Medi-Cal and safety-net programs, especially expansions to undocumented residents, which analysts warn are growing faster than the revenue base.
- Billions spent annually on homelessness programs with little measurable progress as homelessness soars in major Californian cities.
- A reliance on Silicon Valley tax revenue, which swings wildly depending on tech stock valuations and some of these companies are relocating to more tax-favorable states.
City of San Francisco workers remove a homeless encampment in the Bayview neighborhood in San Francisco, on Aug. 1, 2024. (David Paul Morris/Bloomberg via Getty Images)
- Costly backfilling of shrinking federal funds, forcing California to shoulder more of its entitlement programs.
Instead of addressing these realities, politicians have spent years using accounting gimmicks, fund transfers, delayed payments and borrowing from special accounts to mask the red ink. The LAO now warns that these "one-time solutions" have mostly been exhausted.
Newsom’s budget fantasy has hit reality
Governor Newsom has spent years painting California as a progressive Utopia that should be a "model for America" that proves big government can work. But you can’t call yourself the model when you:
- Run chronic deficits.
Rather than tightening belts or prioritizing necessities, lawmakers have layered on new programs, expanded benefits and made long-term promises based on temporary revenue spikes.
- Hollow out your reserves.
- Can’t control spending.
- Depend on a tiny group of wealthy taxpayers.
- Have the highest poverty rate when adjusted for cost of living.
California is now living paycheck to paycheck ironically, just like millions of Californians who can’t keep up with the state’s affordability crisis.
Meanwhile, other states are running surpluses
While California sinks deeper into red ink, fiscally disciplined states across the country are announcing surpluses, refunding taxpayers, or increasing reserves.
- Texas, Florida and North Carolina all projected strong surpluses or cash cushions.
- States with lower taxes and leaner budgets like Utah, Tennessee and Idaho continue to exceed revenue expectations.
In other words, the states that California politicians love to criticize are the ones balancing their checkbooks.
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This isn’t a one-off crisis for California. It’s a multiyear budget mess that keeps getting deeper.
California’s model is fool's gold
A state with:
- The biggest population loss in the country.
- The biggest homeless population.
- The highest taxes.
- And one of the largest structural deficits in America
… should not be the model.
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A functioning state must be able to fund its commitments responsibly, plan for downturns and put the brakes on when spending outruns revenue. California has failed to do any of that.
California is not the model for America. It’s the cautionary tale for other states and our country.
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