California officials were reportedly aware for months of an accounting mistake worth about $2 billion in the state budget while California Gov. Gavin Newsom (D) was publicly presenting a separate deficit estimate.
According to the report, the issue involved pension calculations tied to the California Public Employees’ Retirement System, commonly known as CalPERS.
The accounting problem could reduce the size of the short-term deficit projected in Newsom’s January spending plan, which estimated a roughly $3 billion gap for the upcoming fiscal year.
However, state analysts also warned that California still faces much larger long-term structural deficits.
Those annual future deficits were estimated between $20 billion and $35 billion, meaning the $2 billion issue would not solve the state’s broader budget problems.
According to a memo cited in the report, legislative leaders were informed of the issue in February after it was identified by the nonpartisan Legislative Analyst’s Office.
The matter was not publicly disclosed until April.
The Legislative Analyst’s Office said the administration double-counted certain retirement contribution rates, creating an estimated $1.6 billion overstatement.
A second miscalculation involving projected future pension contributions reportedly added another $450 million.
Combined, the two items totaled roughly $2 billion.
Gabe Petek said errors of this kind can occur in a budget as large and complex as California’s.
He stated that part of his office’s role is to review administration calculations and identify mistakes or formula issues.
Petek also said the problem is expected to be corrected in Newsom’s revised May budget proposal.
The Newsom administration disputed the description of the issue as an error.
H.D. Palmer said the adjustment reflected a revised method for estimating pension-related payments rather than a simple calculation mistake.
“This isn’t a calculation error. It’s a revision to better estimate how these payments are made,” Palmer said.
The delayed disclosure has drawn criticism because lawmakers and the public were discussing budget shortfalls while the issue remained internal, per the Conservative Brief.
California has faced repeated budget pressure from volatile tax revenues, especially dependence on capital gains and high-income earners.
Analysts also warned that any stock market downturn could significantly reduce income tax collections and worsen deficits.
The report also referenced population outmigration from California, with many residents citing high living costs and regulatory burdens.
The budget story arrives as Newsom continues to face questions about a possible 2028 presidential run.
Newsom recently acknowledged he is considering a campaign but said no final decision has been made.
He is term-limited and will leave the governor’s office when his current term expires next year.
In recent months, Newsom has traveled to early primary states, launched a podcast, and increased national media appearances.
