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1. Budget and Fiscal Management
Critics point to recurring deficits and spending choices as evidence of poor fiscal management:
Persistent Deficits: Despite recent revenue surges, the nonpartisan Legislative Analyst’s Office (LAO) projected an $18 billion deficit in late 2025, while the Newsom administration estimated a more modest $2.9 billion shortfall for 2026-27. Longer-term forecasts suggest potential deficits could balloon to $22 billion by 2027-28.
Spending Expansion: Under Newsom, state spending grew to record levels, with some critics arguing the government has become bloated. Recent attempts to close budget gaps have relied on one-time solutions like reserve withdrawals and borrowing rather than deep structural reforms.
Unemployment System Fraud: The Employment Development Department (EDD) oversaw an estimated $33 billion in fraudulent payments during the pandemic, a loss critics cite as a major failure in state operations.
2. High Cost of Living and Energy
California continues to have one of the highest cost-of-living burdens in the United States.
Energy Prices: California has the second-highest electricity rates in the nation. While Newsom recently signed an "energy affordability package" intended to lower bills, critics argue existing "Green New Deal" mandates and cap-and-trade extensions continue to drive up costs for families and small businesses.
Gasoline Costs: Gasoline prices in California are among the highest due to taxes and regulations. Critics claim the total gas tax obligation could reach approximately $2 per gallon in 2026.
Housing Crisis: A chronic shortage of affordable housing has driven middle-class residents and workers out of state.
3. Business Climate and Corporate Exodus
The state's regulatory and tax environment has led to a widely publicized departure of major corporations:
Corporate Departures: High-profile companies, including Tesla and Palantir, have relocated headquarters to other states, citing burdensome regulations and high costs. Stanford University research indicated that businesses were leaving the state twice as fast as in previous years.
New Regulatory Burdens: In 2026, new climate-related disclosure laws (SB 253 and SB 261) require large companies to report greenhouse gas emissions and financial climate risks, which business groups argue increases compliance costs and discourages investment.
4. Labor Market and Employment
High Unemployment: California's unemployment rate was 5.5% in late 2025—the highest in the country compared to a national average of 4.6%.
Sluggish Job Growth: Forecasts for 2025-2026 show a significant slowdown in job growth, with some projections as low as 3,000–6,000 new jobs per month, well below pre-pandemic levels.
Labor Mandates: Policies such as the $20 minimum wage for fast-food workers and AB 5 (which restricted independent contracting) are cited by critics for increasing labor costs and harming small business owners.
5. Homelessness and Public Safety
Critics often link the economic health of California's cities to the state's handling of social issues:
Homelessness Spending: Despite spending over $24 billion on prevention programs, the state's homeless population grew by over 30% from 2007 to 2022, with California now home to a third of the nation’s homeless population.
Retail Theft and Crime: Critics blame policies like Proposition 47 (which Newsom championed) for a rise in retail theft, which they argue hurts the commercial vitality of urban centers.
What are some criticisms of Newsom's approach to homelessness?
What new investments are in Newsom's 2026 budget?
Did California's unemployment rate decline in early 2026?
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