Roseville State Senator expresses deep concerns over governor's budget plan

State Senator Roger Niello (R-Fair Oaks) joined other state Republicans in responding strongly against Governor Gavin Newsom's 2026-27 budget proposal, and much of what the senator is expressing is echoed by a state agency that provides objective fiscal analysis to the state legislature. On Friday, Jan. 9, Newsom's office presented what many described as an overly optimistic view of the state's economic standing, forecasting a shortfall of $2.9 billion for the fiscal year. Newsom's budget proposal is a $349 billion spending plan, which is nearly $28 billion more than the current state budget. Newsom's plan banks on the concept that tech and AI stocks will continually cause the stock market to soar. Yet the non-partisan state Legislative Analyst's Office (LAO), which advises the legislature on a variety of issues from budgetary to legal, is blatantly at odds with the governor's budget proposal. In a written response to the plan, the LAO said the plan could put the state in a financially precarious situation. In November, the LAO projected a state budget shortfall of $18 billion, a far cry from Newsom's projection of $2.9 billion. "First, and most importantly, the administration's revenue estimate is considerably higher than ours because it does not incorporate the strong risk of a stock market downturn," wrote the LAO. "Second, however, these higher revenues are offset by higher spending under the administration's assumptions and estimates. … Several historically reliable signs suggest the stock market is overheated and at high risk of reversing course into a downturn in the next year or so. Should a stock market downturn occur, income tax revenues would fall considerably. These risks are severe enough that not incorporating them into this year's budget, as the Governor proposes, would put the state on precarious footing." Senator Niello told the Roseville Press-Tribune that Newsom's budget proposal suggests the governor views the state's financial state with rose-colored glasses, a view that is not realistic or sustainable. "Since I think the LAO budget is a more realistic number, he's not balancing the budget. He says it's balanced, but it's a balance we'll say of convenience," said Niello. "Somebody said to me, isn't the governor just kicking the can down the road? And you could say that, down the road to the next governor, but from the standpoint of those of us who have to stick around here, we're really just running in place." Niello added, "(Newsom's) interest right now isn't so much California as it is every other state other than California because he's looking at running for president. So he's going to be much more interested in raising his profile through the rest of the country." While Republicans have a number of concerns over Newsom's proposal, some key issues are rising to the surface. Niello points out the governor's budget offers no funding for Proposition 36, which was overwhelmingly passed by California voters in 2024. The proposition called for increasing penalties for certain drug and theft crimes, such as making repeat theft convictions felonious. "Almost 70 percent of the people voted for Proposition 36 and the governor is choosing to ignore that desire," said Niello. "He did last year also; the legislature put money in so we will see if they do that again." Another huge concern of Niello's is that Newsom's budget proposal does not include any attempt to pay off the huge unemployment insurance debt the state owes the federal government. Niello explained the debt is a result of the Covid shutdown. The state didn't have resources to pay all the insurance premiums to people who were unemployed, so the federal government provided aid. Niello said about half of the states in the country were in a similar predicament, yet all other states have paid back their debt to the government; all but California."The result of that is, first of all the state has to pay the interest on that loan, but frankly more importantly it becomes quite a burden on businesses … and in particular, it's toughest on small businesses," explained Niello. "What happens is as long as that debt isn't paid, their unemployment insurance premiums, per employee, keep going up every year that the debt isn't paid, to an eventual maximum of $400 per employee. That means they are disincentivized to add additional employees because they have to pay exorbitant unemployment insurance premiums." Another concern for Niello is the lack of support for rural hospitals. He said there is nothing in Newsom's budget to provide assistance to hospitals in rural areas that are struggling; if these hospitals go out of business, people who live in those sparsely populated areas are going to be in dire straits. Higher education also received no improvement in financing in Newsom's latest budget proposal. Niello and his Republican counterparts want an emphasis on more funding for the UC and CSU systems so more California students can afford to stay and learn in their home state. Now that the governor has released his budget proposal, the seemingly endless budget hearings and subcommittee hearings will begin. While Republicans are in the minority in the state legislature ("We're small but strong," said Niello), the senator is heartened by the fact Sen. John Laird (D-Santa Cruz) is the new budget chair. Niello describes Laird as a collaborator who has said he wants to involve Republicans in the process. "I'm hoping that by working collaboratively with my friend Senator Laird, representing the Republican priorities, maybe we can make some progress," said Niello. The new President Pro Tempore of the State Senate is Monique Limon, a Democrat from Santa Barbara. Niello said she has expressed interest in also taking a more bipartisan approach as legislators discuss the spending plan. The first part of this year will be dominated by these budget talks in the various committees and sub-committees; the legislature has a constitutional mandate to pass a budget plan by June 15.