Taxpayer ROI: How Many California Cities are Running Huge Budget Deficits

National Economic Council Director Kevin Hassett announced the March jobs report – the U.S. saw 178,000 jobs added and a 4.3% unemployment rate.

But not in California. According to the California Employment Development Department, California’s unemployment rate came in at 5.4%  in January 2026, a decline by 0.1 percentage point from the December 2025 rate of 5.5%. In addition, the State’s employers added 93,500 nonfarm payroll jobs. This doesn’t add up. It’s a well-known joke that California always has to adjust its unemployment rate and jobs report the next quarter.

This is important because we remember the December unemployment numbers at 5.6% with independent predictions as high as 5.9% early in 2026.

Wallethub is out with its 2026 Best & Worst Taxpayer ROI report of states. “Around 66% of Americans think their current tax rate is too high, according to WalletHub’s Taxpayer Survey. We do know, however, that taxpayer return on investment, or ROI, varies based on where one lives.”

California ranks nearly worst, 49th, for Return on Investment (ROI). The sheer beauty of the state isn’t enough any longer for most people.

Wallethub ranked states on ROI by State and Local taxes, School Systems, Roads & Bridges, Hospital Systems, Violent Crime Rate, Water Quality, and Percentage of Residents in Poverty.

Notably, taxpayers in Red States get better ROI than taxpayers in Blue States, Wallethub reported.

New Hampshire, Florida and South Dakota were the top three in Taxpayer ROI because of:

• No state income tax
• Tax resources have had a good impact on crime prevention
• best public school systems
• public high school graduation rates
• quality of infrastructure
• High quality university systems
• highest spending on parks and recreation per capita
• highest highway spending per driver

As California’s population decreased by 0.44% from 2020 to 2025, the number of state employees grew 24.5% in the last decade. Total state spending grew 48%.

Just last May, the Globe reported:

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.

Gavin Newsom is a very big spender, with little to show for it.

Today California’s budget deficit is projected to be nearly $18 billion for the upcoming fiscal year, with estimates that it could grow to $35 billion annually by fiscal year 2027-28 if spending continues to outpace revenues, as it has during Newsom’s entire two terms.

What Dan Walters reported at the time 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 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.”

Gov. Gavin Newsom loves to brag 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 number#1 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.

Last year we reported on California cities running huge budget deficits and asked, “are California’s cities also staring down the barrel of a loaded gun?”

The state and California’s largest cities can’t continue to run massive budget deficits. Notably, the California Legislative Analyst’s Office warned “Revenues Are Unlikely to Grow Fast Enough to Catch Up to Atypically High Spending Growth.”

How Many California Cities are Running Huge Budget Deficits? we asked in 2025.

How are California cities doing in 2026?

The City of Los Angeles had a $1 billion+ city budget deficit in 2025. How is LA doing today? LA records second consecutive annual budget deficit, according to the Los Angeles Controller. “The controller’s office released its Annual Comprehensive Financial Report for the 2024-25 fiscal year, which ended June 30, 2025,” MyNewsLA reported. “While the report recognized that L.A.’s deficit is a ‘culmination of decades of unsustainable budgeting,’ it also found that crumbling infrastructure and reduced city services have worsened since 2023.”

“We’ve gone from record levels of General Fund Reserves of $648 million two fiscal years ago to $420 million,” City Controller Kenneth Mejia said in a statement. “In addition, four rating agencies (S&P, Fitch, Moody’s and Kroll) have given the City a ‘negative outlook’ with the same concerns that we have been raising over the past three years coupled with the potential liabilities and damages from the Palisades Fire.”

Kenneth Mejia is the same LA Controller the LA City Council tried to oust recently – a real case of shooting the messenger.

In 2025, we reported San Diego was over $300 million in debt. That remains the same today: NBC 7 San Diego reports, “San Diego County faces $300 million federal funding gap. “After months of concern over federal funding cuts, local leaders say the impacts are now becoming clear, with San Diego County facing a potential $300 million annual loss affecting affordable housing, health care and access to food, among other things.”

San Diego Mayor Todd Gloria specifically asked Gov. Newsom for another $1 billion in homeless funding… the black hole of state and local spending, more likely to be used in Gloria’s general fund.

The City of Sacramento had a $66 million budget deficit in 2025. Today, the City of Sacramento has a projected budget deficit of $66.2 million for the fiscal year 2026–27, “primarily due to a long-term structural imbalance where expenses are growing faster than revenues.” Duh. The City of Sacramento blames “inflation, rising costs, and expanded services.”

Has the Mayor ever heard of spending cuts instead of expanding services?

San Francisco had a $876 million budget deficit in 2025. “In December, the city’s two-year deficit was predicted to be $936 million. Now, in March, the projection is $643 million, a 30-percent decrease,” Mission Local reported.

San Jose projected a $60 million budget shortfall in 2025, then ratcheted it down to $35.6 million, but projected a $52.9 million deficit for 2026. San Jose’s base forecasting model shows an overall $69.2 million shortfall over the next five years, the Mercury News reported.

The City of Fresno reported in 2025 the city was facing a budget deficit of over $20 million in the 2026 budget. Today, the projected deficit is anywhere between about $69 and $295 million, Fresnoland reported. WHAT?

Fresno officials blame The “One Big Beautiful Bill Act,” signed into law last year, which slashed a lot of federal spending, something which California cities relied too heavily on.

Oakland was facing a $268 million deficit over the next two fiscal years, the city reported in 2025. Oakland is facing a $290 million budget gap over the next two years, NBC Bay Area reported.

Berkeley had a $28M budget deficit in 2025. Berkeley faces a $29 million budget deficit for the 2026 fiscal year, “primarily due to rising personnel costs and one-time funding sources no longer being available,” Berkeley Scanner reported.

And that Wallethub ranked California 49th for taxpayer Return on Investment is no mystery.

And 49th overall:

Judging by the horrific budget deficits in California’s largest cities, as well as the state budget deficit, Gavin Newsom is ending his eight years as governor on a very low note – worst ROI in state history.