California faces another significant budget deficit next year, larger than what lawmakers expected.

The nonpartisan Legislative Analyst’s Office (LAO) unveiled its fiscal outlook for the 2026-2027 budget on Wednesday, reporting that the state faces a deficit of nearly $18 billion.

The big picture: The report states that the projected $18 billion deficit is about $5 billion larger than what the state anticipated in June, even though California’s revenue has improved. • Constitutional spending requirements under Proposition 98 and Proposition 2 have almost entirely offset revenue gains. • The LAO also estimates that costs in other programs will be around $6 billion higher than anticipated. • Ultimately, the deficit will grow around $35 billion annually starting in 2027-2028 because s

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