Gov. Gavin Newsom (D-CA) is entering what could be the defining fiscal test of his governorship: whether he can stabilize California‘s finances before leaving office and hand his successor a clean budget.

After years of surpluses driven by a booming stock market and surging tax revenues, California now faces a far more uncertain outlook marked by volatile revenue swings, rising spending pressures, and growing concerns about long-term deficits, all against a backdrop of strained relations with the federal government. Newsom’s revised budget proposal, set to be unveiled Thursday, could represent his final opportunity to demonstrate fiscal control before he is termed out of office in 2027.