A leaked memo shows Gov. Newsom's administration miscounted CalPERS contributions when drafting the January budget, inflating a projected $2.9 billion shortfall. The mistake stems from double‑counting rates worth $1.6 billion and applying an incorrect future contribution formula that adds another $450 million error. Analysts say correcting these figures could shrink the deficit dramatically.

Legislative Analyst Gabe Petek confirmed the errors to KCRA 3, noting the LAO flagged them in February but kept the details from the public. Democratic leaders chose not to announce the $2 billion discrepancy, arguing it is standard practice to adjust numbers in the May revision rather than issue a press release. Critics accuse the administration of opacity to avoid political backlash.

The upcoming May budget revision will incorporate the revised CalPERS estimates, giving lawmakers a clearer fiscal picture as they negotiate spending cuts and allocations. With the corrected numbers, California may face a smaller gap than previously feared, altering the leverage of both progressive and conservative budget proposals.