{"id":644011,"date":"2026-05-15T04:31:09","date_gmt":"2026-05-15T04:31:09","guid":{"rendered":"https:\/\/www.newsbeep.com\/us\/644011\/"},"modified":"2026-05-15T04:31:09","modified_gmt":"2026-05-15T04:31:09","slug":"newsom-celebrates-as-the-ai-boom-bails-out-california","status":"publish","type":"post","link":"https:\/\/www.newsbeep.com\/us\/644011\/","title":{"rendered":"Newsom celebrates as the AI boom bails out California"},"content":{"rendered":"

California is poised to see a spike in revenue in the next fiscal year. For a state that\u2019s faced\u00a0multibillion-dollar budget deficits<\/a> the past three years, it\u2019s potentially good news, but analysts warn it\u2019s no time to celebrate.<\/p>\n

On Thursday, Gov. Gavin Newsom\u2019s proposed budget revision<\/a> touted a $16.5 billion projected increase in revenue, largely thanks to income tax gains from a booming stock market coasting on artificial intelligence enthusiasm. Three California AI giants are aiming to go public later this year, and while excitement alone has boosted the economy, the actual public offerings could send even more into the state\u2019s wallet. Just one week ago, the Legislative Analyst\u2019s Office predicted the windfall could be as high as $25 billion, but with a staunch warning \u2014 the gains won\u2019t last forever.<\/p>\n

\u201cSeveral historically-reliable signals suggest the stock market currently is overheated and due for a correction,\u201d the office wrote in a May 7 report<\/a>. \u201c… It is now hard to ignore that the stock market appears, on its face, to be in a speculative bubble, rivaled only by the dot-com boom and the Roaring Twenties.\u201d<\/p>\n

Though the increase in projected revenue was a bragging point in Newsom\u2019s budget announcement \u2014 where economic \u201cdominance\u201d was a main theme \u2014 the governor recognized the need to address California\u2019s volatile revenue stream.\u00a0<\/p>\n

Newsom highlighted the expected initial public offerings of OpenAI, SpaceX and Anthropic as an opportunity to capture more revenue, and he called reforming California\u2019s system for injecting revenue in the state\u2019s reserve budget as \u201clong overdue.\u201d But the governor also warned that a drop in the stock market could send a shock to the state\u2019s budget.<\/p>\n

\u201cWhen the nation gets a cold, we get the flu,\u201d Newsom said. \u201cThe issue around volatility has to be fundamentally addressed.\u201d<\/p>\n

Newsom\u2019s budget attempts to weather that volatility by adding $9.7 billion to the state\u2019s Surplus Holding Account as a way to \u201cavoid\u00a0overcommitting revenues during uncertain economic conditions,\u201d according to a Thursday news release<\/a>.<\/p>\n

The Legislative Analyst\u2019s Office\u2019s concerns, published in the May 7 report, are not new. The office warned in November of a potential AI bubble burst in the current fiscal year. But with the fiscal year set to close on June 30 and the stock market still roaring, the expected collapse in stock values has yet to happen.\u00a0<\/p>\n

The latest data from the Franchise Tax Board indicates that income taxes have continued to significantly trend upward. In December and April, income tax payments increased 50% compared with the year before, a rare jump largely attributed to the hype over AI, according to the May 7 report.\u00a0<\/p>\n

But just because the state had a good past six months, that doesn\u2019t mean the risk of a collapse has disappeared. The Legislative Analyst\u2019s Office\u2019s revised report reiterates that the AI bubble could still collapse and subsequently crash state tax revenues. Ahead of Newsom\u2019s revised budget announcement, the office recommended the Legislature take precautionary measures to prevent a significant blow to the state budget if a crash were to occur, including avoiding taking on new debt or using more reserve funds.<\/p>\n

\u201cThis was a pattern we saw in the dot-com bubble. It was a pattern we saw during the housing boom and subsequent great recession,\u201d Legislative Analyst\u2019s Office analyst Biran Uhler told SFGATE. \u201cThe sheer rate of growth and income tax revenue are signaling to us that we\u2019re starting to reach points that are kind of similar to those high points in our past.\u201d<\/p>\n","protected":false},"excerpt":{"rendered":"California is poised to see a spike in revenue in the next fiscal year. For a state that\u2019s…\n","protected":false},"author":2,"featured_media":644012,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[45],"tags":[182,181,507,243150,247473,74],"class_list":["post-644011","post","type-post","status-publish","format-standard","has-post-thumbnail","category-artificial-intelligence","tag-ai","tag-artificial-intelligence","tag-artificialintelligence","tag-sfgnews","tag-sfgpolitics","tag-technology"],"_links":{"self":[{"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/posts\/644011","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/comments?post=644011"}],"version-history":[{"count":0,"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/posts\/644011\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/media\/644012"}],"wp:attachment":[{"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/media?parent=644011"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/categories?post=644011"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/tags?post=644011"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}