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California will face a nearly $18 billion budget deficit in the new fiscal year due to higher than expected spending, despite an economic boon largely driven by AI enthusiasm and strong revenue, the nonpartisan Legislative Analyst’s Office said Wednesday.

To make things worse, the $17.7 billion shortfall could balloon to an annual $35 billion by fiscal year 2027-28, as spending continues to grow and debts come due, the office warned in its .

The gloomy forecast is a refreshed look at California’s financial future since June, when the state Department of Finance projected a for the upcoming fiscal year. The widened budget gap could undercut the legacy of Gov. Gavin Newsom, as he will likely be forced to make tough budget

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