How Many California Cities are Running Huge Budget Deficits?
With the state budget deficit, are California’s cities also staring down the barrel of a loaded gun?
By Katy Grimes, May 12, 2025 3:00 am
How many California cities are running huge budget deficits, yet refuse to cut out the real cancer – the bureaucratic and administrative bloat? California’s colleges and universities too – they are cutting sports and academic programs, but not the high-salaried, middle management administrative bloat.
The California state budget has a $10 – $70 billion deficit. And that does not include the unfunded public employee pension debt, totaling over $1.5 trillion. Last May 2024, the Globe reported that The Legislative Analyst’s Office updated spending plan in Gov. Newsom’s revised budget showed a $55 billion budget deficit as opposed to the $27.6 billion figure Newsom presented. The $70 billion figure is from the LAO last year’s projections. This year, Gov. Newsom claimed the budget was balanced, but that’s only because he is running for president.
Politico kindly reported this week that Gov. Gavin Newsom is likely staring down a $10 billion budget hole that could deepen to $20 billion or more. With pending federal budget and DOGE cuts coming, that number is going to climb exponentially because Gov. Newsom and Democrats rely heavily on federal funding in their budget.
As the Globe recently reported, California Gov. Gavin Newsom is bragging that California owns the 4th largest economy in the world. But he leaves out some important details, like poverty, homelessness, crime, taxes, gas prices, housing costs, illegal aliens, welfare recipients, and a $1.5+ trillion total budget deficit, just for starters. And, California is the 1st most regulated state in the U.S. And, California has 15.6% of the nation’s unemployed – a third higher than the state’s overall share of US population.
What Dan Walters reported this week should be repeated in every daily news article for the rest of the year:
“…since Newsom became governor in 2019, state spending has increased, on average, by 9% a year while annual revenues have grown by just 6%. The difference between those two numbers constitutes what budget mavens call a ‘structural deficit,’ meaning that spending baked into law far exceeds what the current revenue system can generate.
The underlying discrepancy between income and outgo is important to remember, because when Newsom unveils his revised budget he’s likely to cite the Los Angeles wildfires and Trump’s tariffs as factors in the budget’s gap.
Both of those events are likely to increase the deficit, but they didn’t cause it. The deficit exists because Newsom and the Legislature have chronically spent more than the revenue system produces, even though Californians have one of the nation’s highest state and local tax burdens, relative to the state’s economy.”
As the Globe frequently reports, It is important to remember that when Gov. Jerry Brown was (re)elected in 2011, the state budget was $98 billion. The state’s population was a little over 38 million. Brown doubled the budget to $199.3 billion in 8 years – with no measurable increase in population. Gov. Gavin Newsom inherited Brown’s $199.3 billion budget, and has grown it to over $330 billion in 6 years – while losing population.
So are California’s cities also staring down the barrel of a loaded gun?
The City of Los Angeles has a $1 billion+ city budget deficit,
San Diego is over $300 million in debt.
The City of Sacramento has a $66 million budget deficit.
San Francisco has a $876 million budget deficit.
San Jose projected a $60 million budget shortfall, then ratcheted it down to $35.6 million, but is projecting a $52.9 million deficit for 2026.
The City of Fresno is facing a budget deficit of over $20 million in the 2026 budget. In 2025, the city expects to have an end-of-year surplus of nearly $15 million, but according to City Manager Georgeanne White, without federal American Rescue Plan Act dollars, 2025 could end up in the red, yourcentralvalley.com reports.
Oakland is facing a $268 million deficit over the next two fiscal years.
Berkeley has a $28M budget deficit.
What will cities do to address their budget deficits?
Sacramento is proposing cutting Sacramento Police Department employees, and raising parking fees. How innovative. LA Mayor Karen Bass announced several cuts and rollbacks in the city budget, including layoffs of 1,600 employees and the elimination of 1,000 positions. Bass also agreed to a reduced salary. San Diego will make cuts, including to police, homeless services, libraries, and other essential services. San Diego city lawmakers and employees, however, aren’t getting pay cuts. While Los Angeles and San Francisco are making a lot of sacrifices to cut back on their deficits, including SF Mayor Daniel Lurie not even taking a salary, San Diego isn’t taking those needed drastic steps, the Globe reported.
Smaller California cities work very hard to stay in the black, avoiding deficit spending, but Mayors report that unfunded mandates coming from the Legislature and Governor make it very difficult. One Mayor told the Globe, “these unfunded mandates are killing us.”
“The Governor’s mandating that we build houses even though we don’t have the resources, i.e. Public Safety and or water to cover the offset of new housing… he doesn’t care. He’s mandating it,” the Mayor said.
Others who have served on city councils said that state unfunded mandates put cities in a really tight spot, which forces what the governor wants – compliance. When cities are forced to spend on programs that do not come funded, programs that they created and budgeted for, based on the needs of their communities, get cut.
Then there are the many Democrat run blue cities, which have been deficit spending for decades. Eventually the bill comes due.
Remember in 2022 when Gov. Newsom proudly (smugly) declared that California had a $97.5 billion surplus? Rather than investing in critical infrastructure like new water storage, Newsom and Democrats spent the historical budget surplus.
But that wasn’t enough for some in the supermajority party. They wanted more. Even during a surplus, “they want to raise taxes on water, fertilizer, dairy, tires, guns and businesses,” then-Senator Jim Nielsen told the Globe. “Why does the state need to raise taxes when there’s a surplus? They are spending their way into another crushing deficit that will harm the poor, blind and disabled, and squeeze the middle class once again.”
Sen. Nielsen was right – that spending was the pork-barrel projects injected by individual legislators into California’s state budget.
Gov. Newsom can’t even expect a federal bailout this year, with DOGE “dogeing” out-of-control federal spending – like bailing irresponsible blue states out.
Under Gov. Newsom’s watch, spending on homelessness increased exponentially, as did the drug-addicted mentally-ill vagrants, crime is historically high, freedoms have been restricted, taxes greatly increased, non-citizens receive health care for free, public school kids’ math and literacy scores are in the toilet, the government-created water shortage has gotten worse. And all of this was taking place as California taxpayers, and California businesses were fleeing the state… taking their tax dollars with them.
Gov. Newsom smugly claims California’s population is growing, refusing to address that those coming in are illegal immigrants, and those leaving are taxpayers and business owners.
And don’t forget California gas prices are expected to escalate 75% to $8.43 per gallon in 2026 with two oil refineries closing. Thank Gavin Newsom for that as well.
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Sooner or later the layoffs must start. This has been obvious for years. And as the Tech sector cools, the problem accelerates.
The rest of America is in no mood to bail out California. So government employees unions or not….layoffs.
We have been very childish as we have pursued wealth in this state, and over the years Rent seekers have multiplied. Now it all begins to tumble down.
A story as old as civilization itself. Did we think it would be different this time?
I’m hoping Katy Grimes will post a future article that lists California cities that have balanced budgets (assuming there are some.) Who are the people running these cities and what are their policies?
@Fed Up. This is a good question but it would require extensive research that includes multiple sources and in the end, may not prove successful. Balanced budgets would probably be more prevalent in smaller cities and towns (less than 50k in population) with multiple and diverse sources of income. Try using ChatGpt or one of the other AI queries. Here is what Grok3 says:
Which cities in California with populations under 50,000 have balanced budgets?
I don’t have comprehensive, up-to-date data on the 2025 budgets for all California cities with populations under 50,000, as this information is typically scattered across individual city websites, financial reports, or local news, and my sources don’t provide a complete list. Municipal budgets are also fluid, often revised mid-year, and balanced budget claims can depend on accounting methods, one-time funds, or deferred costs. However, I can piece together what’s available from my sources and general knowledge, focusing on smaller cities that have been noted for fiscal responsibility or balanced budgets in recent years. I’ll also highlight the challenges in identifying such cities and suggest how you might dig deeper.
Key Points from Available Information
Lack of Specific Data: My sources, including reports from CalMatters, the Legislative Analyst’s Office, and others, focus heavily on larger cities (e.g., San Francisco, Los Angeles, Sacramento) facing deficits, with little mention of smaller cities under 50,000. No source directly lists small cities with balanced budgets for 2025.
General Trends: Many California cities, regardless of size, face fiscal pressures from rising costs (pensions, labor, infrastructure), declining or stagnant revenues, and reduced state/federal aid post-COVID. Smaller cities often have less revenue flexibility (fewer tax streams) but may avoid deficits by maintaining lean operations or relying on reserves.Population Data: According to California demographic sources, there are hundreds of cities with populations under 50,000, but budget details for these are rarely centralized. Examples include cities like Arcata, Los Altos, or Morro Bay, but their 2025 fiscal status isn’t explicitly covered in my sources.
Examples of Potentially Fiscally Stable Small Cities
Based on general knowledge of California’s municipal landscape and patterns of fiscal management in smaller cities, here are a few cities under 50,000 that are often cited for prudent financial management or have avoided major deficit reports. Note that “balanced budget” claims require scrutiny, as cities may achieve this through temporary measures (e.g., reserves, deferred maintenance, or one-time grants). Without 2025-specific data, these are educated inferences:
Los Altos (Pop. ~30,000):
Why Likely Balanced: Los Altos, a wealthy Silicon Valley suburb, has historically maintained balanced budgets due to high property tax revenues, low service demands (no major urban issues), and conservative fiscal policies. The city’s 2023-24 budget was balanced with a focus on reserves and minimal debt.
Caveat: No 2025-specific data in my sources, but affluent small cities like Los Altos often have structural advantages (high tax base, low crime) that support fiscal stability.
Morro Bay (Pop. ~10,000):
Why Likely Balanced: This coastal city has been noted in past years for disciplined budgeting, relying on tourism-driven sales taxes and careful expenditure control. Recent budgets (pre-2025) emphasized infrastructure without incurring deficits.
Caveat: Tourism fluctuations and rising pension costs could strain 2025 finances, but no deficit reports surfaced in my sources.
Arcata (Pop. ~18,000):
Why Likely Balanced: Arcata, home to Cal Poly Humboldt, benefits from stable revenue from student-related economic activity and has a history of community-driven, lean budgeting. Its 2024 budget was reported as balanced with investments in housing and sustainability.
Caveat: Small university towns can face revenue volatility, and 2025 data isn’t confirmed.
Camarillo (Pop. ~49,000):
Why Likely Balanced: Camarillo, in Ventura County, has a diverse revenue base (retail, agriculture, property taxes) and a reputation for fiscal conservatism. Its 2023-24 budget was balanced, with reserves above the recommended 10% of general fund revenue.
Caveat: Rising costs or state funding cuts could impact 2025, but no red flags in available data.
Challenges in Identifying Balanced Budgets
Data Gaps: Most sources focus on crisis cases (e.g., Los Angeles’ $1 billion deficit, Sacramento’s $77 million shortfall). Smaller cities’ budgets are less reported unless they face major issues.
Definition of “Balanced”: California cities are legally required to pass balanced budgets, but this can be achieved through one-time funds, borrowing, or deferring costs, which masks structural deficits. A truly balanced budget should align ongoing revenues with expenditures without gimmicks.Fiscal Pressures: Even small cities face challenges like pension liabilities, inflation, and state mandates. The Center Square notes that California’s economic headwinds (e.g., 150,000 job losses in 2024) affect municipal budgets broadly.Population Threshold: Cities under 50,000 vary widely—some are affluent (e.g., Saratoga), others rural and revenue-constrained (e.g., Clearlake). My sources list populations but not budgets for most.
How to Find More Definitive Answers
To get a precise list of cities with balanced budgets in 2025, you’d need to:
Check City Websites: Most cities post their adopted budgets online (e.g., look for “2024-25 Adopted Budget” or “2025-26 Proposed Budget”). Search for cities like Los Altos, Morro Bay, or others under 50,000.
Use State Resources: The California State Controller’s Office (sco.ca.gov) compiles local government financial reports, though they lag by a year or two. The “Cities Financial Transactions Report” may show 2023-24 data.
Consult the League of California Cities: Their reports or Western City Magazine might highlight fiscally sound small cities.
Local News: Small-city budget issues often appear in local papers (e.g., The Acorn for Camarillo, The Tribune for San Luis Obispo County cities).
Population Filter: Use a list of California cities by population (e.g., from worldpopulationreview.com) to identify those under 50,000, then cross-check their budget documents.
Broader Context
Larger California cities like San Francisco ($1 billion gap), Los Angeles ($600 million to $1 billion), and Sacramento ($77 million) are struggling with deficits, often due to overspending, liability payouts, or economic slowdowns. Smaller cities, while less in the spotlight, aren’t immune. However, those with diversified revenues (e.g., tourism, property taxes) or low service demands (e.g., affluent suburbs) are more likely to maintain balanced budgets. The state’s overall budget is “roughly balanced” for 2025-26, per the Legislative Analyst’s Office, but this doesn’t guarantee local stability, as state aid cuts could trickle down.
Final Answer
I can’t provide a definitive list of California cities under 50,000 with balanced budgets for 2025 due to limited specific data. However, cities like Los Altos, Morro Bay, Arcata, and Camarillo are likely candidates based on their fiscal histories and economic profiles. To confirm, check individual city budget documents or state financial reports.
Raymond, thanks for the research! I thought I read a week or so ago that Huntington Beach had a balanced budget. I’m looking for that article. Oh, I see TJ mentions it below.
Excellent summary, Raymond! Thanks for putting that together for us.
Here’s one California city:
The City of Huntington Beach has a balanced budget for the fiscal year 2024-25, which was unanimously approved by the City Council on June 5, 2024. The budget totals $527 million and includes $301.7 million in general fund revenues and $300 million in expenditures, resulting in a $1.7 million surplus.
(https://www.latimes.com/socal/daily-pilot/news/story/2024-06-05/huntington-beach-adopts-527-million-budget-for-new-fiscal-year)
All seven members of the city council are Republicans, forming what Councilmember Tony Strickland has dubbed the “MAGA-nificent 7”. This shift occurred after the 2024 election, where Republican candidates Chad Williams, Don Kennedy, and Butch Twining were elected, replacing the incumbent Democrats Dan Kalmick, Natalie Moser, and Rhonda Bolton.
Back in March, the City of Huntington Beach also filed suit against the State of California for its laws “protecting dangerous illegal aliens” and for it support of sanctuary policies.
Wish I still lived in Huntington Beach. Sigh.
TJ, I live in a different coastal town (that is also known for surfing) but it is the antithesis of Huntington Beach. My town is run entirely by commies and has a huge population of drug-addled zombies who steal anything that isn’t bolted of welded to something else.
Be carefull about reporting on well managed cities, Sacramento might come up with some scheme to loot cities operating in the black. After all there are off shore bank accounts that ngo managers need to fill, non-citizens to subsidize and wildly overpriced and badly managed mass transit to fund.
It’s time that these cities & municipalities, red mostly or not, take a lesson from Gavin and the Democrats and just ignore Sacramento’s mandates and law. There comes a point when you simply have to scream “ENOUGH INSANITY” and stop complying with stupidity! And the scheme to cut law and order and safety programs, I think, is less of a way of punishing the general population and more indicative of their core values of disdain for law and order. Why? Because they can’t handle “No” to their “superior” ideas, laws and mandates!
Why aren’t democrats upset at the coveted government employees being laid off and filing court cases to stop the layoffs, like they are doing to President Trump at the federal level? We need we need to vote out democrats from the governor to representatives. It would be nice to say there are some common sense democrats in Sacramento, there aren’t any. They all vote in lock step on bills that make our lives more controlled, more expensive, less safe and worse off. The democrat Marxist policies are destroying California.
I saw a report recently, I forget where and that’s a problem I know, that what corrupt Mayor Karen Bass meant by her “pay cut” and the other touted “pay cuts” in general was that “cut” meant she and they would not receive their expected annual (and generous) RAISE. This dirty trick, really a big LIE of course, aligns with what I noticed first hand over the years with my own local govt; that is, city tricks and school district tricks, so I’m more than inclined to believe it. I remember from L.A. City days that city staffers don’t get fired, they get transferred to “Chinatown” or “San Pedro.” I’m sure many of you are aware of this kind of B.S. going on in your localities too. It’s like the LAUSD teachers who get sent to the “rubber room” where they sit watching TV all day for their various misdeeds, even unacceptable funky stuff with kids, with teachers union backing, but never get fired, and still collect their paychecks and benefits without fail.
Very interesting.
Any city that chased state grants and based their policies on the state handouts will be in big trouble.
Think Vision Zero and Homeless Navigation Centers.
The city I live in was chasing these grants, citizens asked, when the money runs out what happens to these programs and the maintenance of them? Answer: Crickets, silence!
It would be very interesting to see which cities stayed away from the state “ crack” that they have become dependent on!
Breitbart is reporting today that President Donald Trump’s Department of Homeland Security is investigating California over allegations of providing federal benefits to illegal aliens at the taxpayer’s expense. Homeland Security Secretary Kristi Noem said in a statement that “radical left politicians in California prioritize illegal aliens over our own citizens, including by giving illegal aliens access to cash benefits. The gravy train is over. While this subpoena focuses only on Los Angeles County – it is just the beginning,” Noem added.
Additionally the Labor Department is promising to revoke federal grant money from states that continue to grant unemployment benefits to illegal immigrants.
Winning!
Hair-gel Hitler Newsom and the criminal Democrat thug mafia that controls the state must be seething?
(https://www.thegatewaypundit.com/2025/05/trump-administration-reportedly-revokes-visas-baja-california-governor/)
Yes, indeed TJ. MAGA is winning on ALL fronts in this war with the global leftist woke criminal NGOs, their political allies and benefactors. Waiting for some indictments so that plea bargains can result in more indictments up their leadership ladder……all the way to the TOP.
EXCELLENT
Let’s get cracking
It is very interesting that someone is running ads on tv to come to work for the state. Wasting money.
I had a dream last night —– a bunch of politicians and bureaucrats were in shackles wearing orange.
Make my dream come true!
Yes, Showandtell. and I would recommend reinstituting the chain gang.
Sounds good, Fed Up. They could start with breaking pavement to start fixing the CA highways.
Wanted to also post this L.A. Homeless Authority whistleblower blowup which has come out in recent weeks so that no one here misses this particular scandal — a very big deal:
“Whistleblower Claims Accuse LAHSA Chief of Misconduct, Data Suppression”
https://smmirror.com/2025/05/whistleblower-claims-accuse-lahsa-chief-of-misconduct-data-suppression/
Thanks for the link, Showandtell. I’m shocked, just shocked to learn that Va Lecia Adams Kellum, the chief executive of the Los Angeles Homeless Services Authority (LAHSA) is corrupt to the core. On the other hand, isn’t that how the Homeless Industrial Complex is supposed to operate?
Ha ha, yes, I think we were all shocked to learn of “Dr.” Va Lecia’s crookedness, weren’t we? NOT!
Don’t forget she was personally picked and lovingly appointed by the Honorable Mayor Bass.
What a racket.
And you’re right, this woman is the poster child of the Homeless Industrial Complex and its many money-hungry criminal operations. While the city crooks become super-rich the drug-addicted mentally-ill street people roll around in more filth and squalor and misery and the horrors of hell than they did before. All thanks to crooks like Dr. Va Lecia and her brothers and sisters in crime.
Speaking of the Homeless Industrial Complex, get this:
“Newsom Calls on Cities to End Homeless Encampments”
https://www.thewrap.com/newsom-calls-on-cities-end-homeless-encampments/
“The time for inaction is over. There are no more excuses.” WHAT?
Hilarious. He’s “amazing,” all right. Uh, hasn’t the Worst Governor Ever, Gavin Newsom, been saying this very thing since he was the Worst S.F. Mayor Ever in 2004? Or maybe even since he was the Worst S.F. Supervisor Ever in 1997? He was going to “end homelessness in 10 years?” Right?
He is doling out even more billions to his friends this time of course. Again. This guy is incredible, and not in a good way, even while the unaccounted-for $24 BILLION (Newsom brags(!) it’s $27 billion) already spent is being fast-track investigated by the U.S. Attorney.
Best of luck, Gavin! Good job! And enjoy your liquor!
This week another Biden tell all drops by Jake Tapper. I have read where it is going to be explosive as another swamp reporter turns on the Biden. What is going to be interesting is if/when additional information comes out about the 2020 election in the book. I believe ShowandTells dream about California politicians comes true once all of the layers are peeled back about how elections have been manipulated and the prosecutions begin. The state budget is actually an easy fix. You cut 30% of the total budget and in the process wipe out the administrative class. You make the State legislature part time like most of Californias history has been (I believe Texas is still parttime). In1966 California’s legislature went fulltime. One of the justifications was to become a professional organization. Lastly with the administrative class gone you deregulate all energy costs by eliminating regulations and taxes that needlessly drives up costs that supports the administrative criminal activities. Lastly you immediately cut income tax. The current tax scheme is designed to support the runaway criminal activities via a wealth transfer. With more freedom in the market, revenues will flow into the state coffers that will support a right sized government.
You can spot a well run city a mile away (or a mile in). The roads are in fantastic condition. Camarillo has nice roads. Huntington Beach has roads that are billiard table flat.
If you drive in Los Angeles, you better have wheel and tire hazard insurance.
Example of Sacramento county’s deficit: a few years back, a good friend told me he was about to retire.
When I mentioned that hi drop in income will take his family some adjustment time, he then told me “ won’t be any worry. The are going to rehire me at my current wage level for a least one year.”
When I chuckled about nice program, show is that possible, he went on tellling me the way the county sees it, he won’t be receiving any benefits from the extra income, his benefits will come from his retirement side of the ledger.
When I inquired who signed that labor contract, he added the county board of supervisors thought it was a money saving issue cause they wouldn’t be paying double benefits.
My only response at that time was”eh?” Then it occurred to me that is how public servants think.
And the amazing thing is the people who are creating and/or are perpetuating still continue to get reelected.
BETTER WAKEUP CALIFORNIA!!!