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RiversideCA.govFiscal Year 2025/26 State Governor’s May Revision Overview Finance CommitteeJune 11, 2025Finance Department
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•The State Constitution and related Government Codes require the Governor submit a proposed budget to the Legislature annually by January 10, provide an update to the proposed budget by May 14 of each year, and that the Legislature pass a budget bill by June 15.•Governor Newsom released the Fiscal Year 2025/26 State May Revision to the State Budget on May 14, 2025. BACKGROUND 5/30/2025
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•The State Governor’s May Revision projects an estimated $12 billion (5.8%) shortfall in FY 2025/26. •Proposes $12 billion in solutions in FY 2025/26 to close the General Fund deficit–Reductions—$5 billion–Revenue/borrowing/loans—$5.3 billion–Fund Shifts—$1.7 billion•Assumes continued withdrawals from state budget reserves.OVERVIEW RiversideCA.gov4
FY 2025/26 Expenditures
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FY 2025/26 Revenues
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•Budget Reserves and Gann Limit Reforms•Housing and Homelessness•ClimateBudget Proposals 5/30/2025
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State sales tax forecast is $2 million lower in 2023-24, $405 million lower in 2024-25, and $259 million lower in 2025-26.Forecast reflects changing national conditions that economists consider to be a “growth recession”.Major Consumer Price Index components are projected to experience higher inflation in 2025 and 2026 as a result of the broad and elevated tariffs.Personal income growth is expected to slow from 6.5 percent in 2024 to 4 percent and 4.1 percent in 2025 and 2026, respectively (compared to 4.2 percent and 4.6 percent in the Governor’s Budget) due to general weakening economic conditions. Wages and salaries are downgraded by $36.2 billion per year or 1.8 percent.Forecast for permitted units is downgraded by 14,000 units or 12 percent on average through the forecast window due to low actuals since Governor’s Budget, higher projected interest rates, tariff-induced material cost increases, and potential labor supply issues.Sales Tax & Economic Forecast Assumptions RiversideCA.gov8
STRATEGIC PLAN ALIGNMENT
HIGH PERFORMING GOVERNMENTCROSS-CUTTING THREADS
Equity
Innovation
Community Trust
Fiscal Responsibility
Sustainability and Resiliency
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That the Finance Committee receive and file a report on theFiscal Year 2025/26 State Governor’s May Revision proposal.RECOMMENDATION