SACRAMENTO, Calif. - California Governor Gavin Newsom presented his updated budget proposal on Thursday, achieving balance for his final year in office and the following one. The $350 billion plan features minimal additional spending while steering clear of significant reductions.

Newsom aims to preserve signature initiatives from his leadership of the nation's largest state and one of the world's top economies. With a potential 2028 presidential bid on the horizon, the Democrat positions the budget as prudent stewardship, emphasizing protection of core priorities alongside bolstering emergency reserves - a direct response to detractors claiming overspending.

Legislative analysts note that state expenditures have surged over $100 billion since 2020.

-We are reducing deficits without compromising essentials,- Newsom declared.

Unable to run for a third term, Newsom departs office in January.

Revenues, fueled primarily by a robust stock market and the AI sector, exceed January forecasts by $16.5 billion. This surplus erases the previously anticipated $2.9 billion shortfall this year, ensures no gap next year, and halves the projected deficit for the year after, according to his administration. Newsom further proposes reserving $9.7 billion in a contingency fund for upcoming budgets.

California endured multibillion-dollar deficits in recent years, prompting tough measures last year, including scaling back free healthcare commitments for undocumented low-income residents. Independent experts had foreseen annual shortfalls exceeding $20 billion in coming years, though Newsom's figures sometimes diverge from theirs.

Democrats prepare for possible federal reductions in healthcare funding and rising costs for fuel and power amid the conflict in Iran. Officials stress that the state cannot fully replace lost federal support.

GOP legislators argue the proposal falls short on tackling long-term fiscal challenges. With Democratic supermajorities dominating both legislative houses, Republicans hold limited sway in budget talks.

-Governor Newsom seems to view fiscal stability as merely preventing collapse during his tenure,- stated Assemblymember David Tangipa.

In his presentation, Newsom criticized President Donald Trump and his agenda, including a slide showing Trump and Treasury Secretary Scott Bessent styled as figures from the film -Dumb and Dumber.- Trump -shows little concern for everyday Americans' finances,- Newsom remarked.

The proposal launches the concluding phase of budget discussions between Newsom and legislative Democrats, who must approve a plan by late June.

Lawmakers this session eye corporate tax hikes to ease fiscal pressures. Newsom has historically shunned tax increases; now he advocates slashing fees for startups, curbing certain credits from 2027, and adding sales tax to select digital and cloud services.

These changes could yield over $1 billion in their debut year, per the governor's calculations. He opposes a November ballot measure for a one-off billionaire levy.

Newsom suggests raising monthly premiums for undocumented adults in the state healthcare program from $30 to $50. Introduced last year and slated for July rollout for those under 60, the hike faces resistance from Senate Democrats.

California's progressive tax structure depends heavily on high earners, with roughly half of revenues from the top 1%. Booms swell collections rapidly; downturns trigger sharp declines.

Anticipated blockbuster IPOs from leading AI firms could further lift revenues, potentially setting records. Yet budget specialists caution about an AI bubble that might strain state coffers.

The Thursday outline also allocates $300 million to offset federal health subsidy losses, $5 billion for educator development grants, and $100 million aiding Los Angeles region residents recovering from last year's fierce wildfires.