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California’s budget shortfall could be worse than expected

California’s budgetary woes are worse than expected, forcing state lawmakers to grapple with a nearly $18 billion shortfall next year, according to a new report from the Legislative Analyst’s Office.

This figure is $5 billion more than previous estimates in June.

Despite improvements in state revenue, the report said mandatory spending requirements under Proposition 98, which sets minimum annual funding for public schools, and Proposition 2, which specifies reserve deposits and debt payments, almost entirely offset any gains, according to the legislative analysis.

It estimated state costs for Medi-Cal and CalFresh, which provide healthcare and food assistance to Californians in need, were also $1.3 billion more than anticipated due to federal cuts from the “Big, Beautiful Bill” that President Donald Trump signed in July, the report stated.

While enthusiasm for artificial intelligence companies has pushed the stock market to record highs, increasing state tax revenue, the report warned the boost likely won’t last.

“With so much exuberance surrounding AI, it now appears time to take seriously the notion that the stock market has become overheated,” the report states. “History suggests that the stock market is prone to overreact to major technological advances, even if the technology itself turns out to be revolutionary.”

The LAO advised lawmakers to increase revenue and reduce spending.

“While important components of the state economy are sluggish, revenues are not falling, nor are conditions as bad as they would be in an outright recession,” the report states. “This makes solving the budget problem with ongoing solutions all the more important. Continuing to use temporary tools — like budgetary borrowing— would only defer the problem and, ultimately, leave the state ill‑equipped to respond to a recession or downturn in the stock market.”

Gov. Gavin Newsom will unveil his annual budget proposal in January, which will serve as a starting point for legislators as they craft the state spending plan.

Assembly Budget Committee Chair Jesse Gabriel said the report underscored the challenging decisions ahead.

“While the Trump Administration continues to pursue destructive policies that will harm California families,” Gabriel said in statement released Wednesday, “the Assembly Budget Committee remains committed to crafting a responsible budget that prioritizes essential services.”

H.D. Palmer, a spokesperson for the California Department of Finance, said the LAO report highlighted the challenges lawmakers will face due to “federal uncertainty, market volatility, and continued growth in both cost and caseload for major state programs.”

“In the coming weeks, the Governor will be finalizing his decisions on how he’ll propose to meet the challenges in the coming year,” Palmer said in a statement.

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‘I visited 8 Christmas markets last year, there’s a reason I’d never do it again’

One Reddit user said they had visited markets in Germany, Austria, the Czech Republic, Finland, and Estonia last winter, and the experience soon began to lose its sheen.

Visiting a Christmas market is a delightful festive tradition for many. The ambience and festivity make them a great way to get into the seasonal spirit, and there’s a chance of finding some unique Christmas gifts you wouldn’t spot elsewhere.

But there can be too much of a good thing, as one Reddit user discovered when they visited eight different markets across Europe last winter. Posting on the social media site, the user said they had visited markets in Germany, Austria, the Czech Republic, Finland, and Estonia, and the experience soon began to lose its sheen.

They wrote: “When I visited more than two or three markets in a short time (weekend) they all started to blur together really quickly. Each market had its own things, like different themes, food, and decorations, but after a few markets, it became hard to remember what things were in which city.

“All the markets started to feel repetitive, like a general ‘winter/Christmas market’ packed with people rather than something new and interesting in each location.”

They added they were disappointed to see local, handmade products were often drowned out by mass-produced goods. Concluding, they said they would still be visiting some Christmas markets this year, but would spread out their visits, and wouldn’t go to as many.

“I don’t regret my travel decisions – mainly because the markets were not the main point of my travels,” they said. “But if they were, I would be, just because it turns into one big blur so easily.

“So I will definitely recommend checking out some Christmas market or two if they’re your thing, just spend a little bit more time there to actually translate and understand all the cool local products they have.”

Commenters were mixed in their reactions, with some agreeing, but others saying they loved visiting Christmas markets in the lead-up to the big day.

One wrote: “I think going to one Christmas market – either here at home or somewhere else – per year can be charming, but to be honest, the whole thing has become so industrialised that I’m pretty done even after one. But I see it as more of an experience and usually don’t want to buy much.

“Like part of the charm is being outside, getting rosy cheeks, dipping in somewhere for a cappuccino or hot chocolate, or having eiswein, being with friends and not having structure or plans. Goes honestly for outdoor markets not at Christmas time, also, but there is something unique and charming at Christmas. It is sad about the squeezing out of real artisans.”

Another said: “Visiting too many Christmas markets quickly can really drain the experience and make them blur together tbh. It is actually smart to focus on one or two. I’d also support local artisans over mass produced souvenirs to keep the culture and quality alive.”

But a third said: “I’ve been to lots of Christmas markets with nice local food, crafts and arts that you can’t easily find elsewhere. And even if it is stuff you can find elsewhere, often the ambience is often quite nice. Talking about the real deal, German markets, and the best of Dutch markets; many other countries have markets which are fake touristy imitations of the real deal.”

And another said: “I love the markets, and go to several for the vibe and the food and the gluhwein. German village markets are fantastic.”

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