Seven Candidates, $68 Billion in Red Ink, and No Easy Answers: Inside California's Governor's Race

With mail-in ballots already arriving at voters' doorsteps, seven candidates to replace Governor Gavin Newsom took the stage at a CNN-hosted debate in Los Angeles on May 5, 2026 — five Democrats and two Republicans locked in a contest that will shape the nation's most populous state for years [1]. The two-hour event laid bare a fractured field grappling with overlapping crises: a housing shortage that has made California the least affordable state in the continental U.S., a federal immigration enforcement push that threatens key industries, and a structural budget deficit that constrains every promise made on stage [2].

The Field

The Democratic side features former U.S. Health and Human Services Secretary Xavier Becerra, who has surged in polls since Congressman Eric Swalwell's exit from the race following misconduct allegations [3]; billionaire investor Tom Steyer, who has spent a staggering $132 million — more than the rest of the field combined — mostly from his own pocket [4]; former U.S. Representative Katie Porter; San Jose Mayor Matt Mahan, backed by Silicon Valley donors who raised $13 million in four months [4]; and former Los Angeles Mayor Antonio Villaraigosa. On the Republican side, conservative commentator Steve Hilton and Riverside County Sheriff Chad Bianco are polling close enough to Becerra that a scenario in which two Republicans advance past the top-two primary is no longer hypothetical [3].

The debate's sharpest exchanges centered on three interconnected issues: housing, immigration, and the fiscal math that underpins both.

Housing: 2.5 Million Units, and Counting (Slowly)

State housing regulators have ordered local governments to plan for 2.5 million new units by 2030, with one million reserved for households earning below 80% of area median income [5]. The target was set through California's Regional Housing Needs Allocation (RHNA) process, which assigns quotas to every city and county. Progress has been uneven. In Los Angeles, only 81,306 units had been permitted through the end of 2025 — roughly 17.8% of the city's RHNA goal with half the compliance period elapsed [6]. Statewide, developers cite high construction costs, labor shortages, protracted environmental review under the California Environmental Quality Act (CEQA), and local political resistance as persistent barriers [5].

The cost disparity is stark. A 2025 RAND Corporation study found that building a multifamily apartment in California costs roughly $430,000 per unit, compared to $240,000 in Colorado and $150,000 in Texas [7]. Municipal development fees average $29,000 per unit in California versus less than $1,000 in Texas. Prevailing wage requirements — which mandate union-scale pay on publicly subsidized projects — account for 32% to 56% of the hard-cost gap between California and Texas [7].

Source: RAND Corporation

Data as of Apr 1, 2025CSV

On stage, candidates offered sharply different diagnoses. Mahan pointed to his record in San Jose of streamlining permitting and expanding housing options, and proposed cutting taxes on housing development [1]. Steyer argued the state needs to build faster and shift costs away from local governments [1]. Hilton called for more single-family home construction in less dense areas, a position that critics argue would worsen sprawl and car dependency [1]. Bianco contended that homelessness is driven primarily by mental illness and substance abuse, not housing supply — a framing that housing economists generally regard as incomplete, though studies do show high rates of both conditions among the unsheltered population [1].

Villaraigosa cited his tenure as L.A. mayor, claiming he built more affordable, workforce, and homeless housing in eight years "in the middle of a recession" than his predecessors managed in twelve [1]. Becerra largely deflected housing questions toward Trump's tariffs and their inflationary effect on construction materials [1].

Source: U.S. Census Bureau / ACS 1-Year

Data as of Dec 31, 2023CSV

The $24 Billion Question: Has Homelessness Spending Worked?

California spent $24 billion on homelessness programs over five years ending in 2023, according to a state auditor's report released in April 2024 [8]. In the peak spending year of 2021-22, the state allocated $7.2 billion — roughly $42,000 per homeless individual based on point-in-time count estimates of 172,000 [8]. Despite the outlay, the homeless population grew.

Source: California State Auditor

Data as of Apr 1, 2024CSV

The auditor's verdict was damning: the state failed to consistently track outcomes across its largest programs, making it impossible to determine whether spending was effective [8]. Only two programs — Homekey, which converts hotels and motels into housing at an average of $144,000 per unit, and CalWORKS Housing Support — were found "likely" cost-effective [8]. New construction of state-subsidized affordable housing, by contrast, runs $380,000 to $570,000 per unit [8].

These figures fueled debate-stage attacks. Bianco and Hilton hammered Democrats for presiding over rising homelessness despite record spending [1]. Porter and Becerra countered that federal cuts under the Trump administration have worsened the crisis by reducing Medicaid and HUD funding streams that California depends on [2].

Immigration: $275 Billion in Economic Stakes

The immigration debate is inseparable from California's economy. An estimated 2.3 million undocumented immigrants live in the state, comprising roughly 8% of the workforce. They are concentrated in industries already facing labor shortages: over 25% of agricultural workers and 26% of construction workers are undocumented [9]. A joint study by UCLA and the Bay Area Council Economic Institute projected that mass deportation would cost California $275 billion in direct and indirect economic activity, shrink construction GDP by 16%, and contract agricultural GDP by 14% [9]. Undocumented workers contribute an estimated $23 billion annually in federal, state, and local taxes [9].

Source: Bay Area Council Economic Institute / UCLA

Data as of Jun 1, 2025CSV

On the debate stage, Bianco — who as Riverside County sheriff has cooperated with federal Immigration and Customs Enforcement — argued that California's sanctuary policies have made the state less safe, citing the death of a teen in his county [1]. Hilton echoed the critique, calling for the repeal of Senate Bill 54, the 2017 California Values Act that limits local law enforcement cooperation with ICE [10].

Democrats pushed back in varying degrees. Becerra, who as state attorney general defended SB 54 in court against the first Trump administration, called the law a constitutional exercise of state authority under the Tenth Amendment [10]. Porter emphasized the economic costs of deportation. Steyer stayed largely on economic terrain, arguing that enforcement should focus on employers who exploit undocumented workers rather than the workers themselves [1].

Legal Limits of the Governor's Power

The constitutional constraints on a California governor's ability to resist or cooperate with federal immigration enforcement are real but often overstated in campaign rhetoric. SB 54 bars state and local police from interrogating or arresting people for immigration enforcement purposes, but does not prohibit all cooperation — officers can still share information about individuals with serious criminal convictions [10]. Federal courts have consistently upheld sanctuary policies under the anti-commandeering doctrine, which holds that the federal government cannot compel states to enforce federal law [10].

During the first Trump administration (2017-2021), the Justice Department's attempts to withhold law enforcement grants from sanctuary jurisdictions were blocked by multiple courts of appeals, which ruled the conditions unconstitutional absent congressional authorization [10]. California's statewide sanctuary law survived a direct legal challenge brought by the Trump DOJ [10]. However, the current Trump administration has pursued new legal theories and executive actions, and California Attorney General Rob Bonta faces fresh litigation, including a lawsuit from the city of El Cajon challenging SB 54 itself [11].

The litigation costs are difficult to quantify precisely. A 2019 analysis found that local law enforcement transfers to ICE alone cost California taxpayers over $7 million in 2018 and 2019 [10]. Legal defense of SB 54 and related policies has consumed substantial attorney general resources, though the state does not publicly break out those costs.

Follow the Money

Campaign finance records reveal a web of connections between candidates and the industries most affected by their housing proposals. Villaraigosa has received sizable donations from the California State Association of Electrical Workers and the California State Pipe Trades Council PAC, collecting $6.96 million total [4]. Bianco raised $4.37 million through more than 10,000 individual donors, including contributions from building and real estate development companies [4].

Most conspicuously, a coalition of the state's realtors, construction industry groups, the electrical workers' union, and Pacific Gas & Electric has spent $14 million on ads attacking Steyer [4], whose self-funded campaign allows him to bypass traditional donor networks but whose housing proposals — including increased commercial property taxes — would directly affect real estate interests.

Mahan's $13 million fundraising haul has been driven largely by tech-sector donors [4], a constituency that generally favors deregulatory approaches to housing but whose interests in rapid development can conflict with tenant protections favored by progressive Democrats.

The Budget Trap

Every candidate's housing and immigration proposals collide with fiscal reality. Governor Newsom's January budget projected a $2.9 billion deficit for 2026-27, but the Legislative Analyst's Office warns of structural shortfalls reaching $22 billion to $35 billion in subsequent years [12]. The state previously faced a $68 billion projected shortfall in 2024-25, which was closed through a combination of spending cuts, delayed programs, and one-time revenue [12]. The next governor will inherit a budget that has been balanced through deferrals, not reforms.

The candidates' fiscal proposals range from ambitious to implausible. Bianco wants to eliminate the state income tax entirely — a levy that generates approximately $140 billion annually, more than half of total state revenue — and replace it with cuts to "wasteful spending" and expanded oil drilling [13]. Hilton has proposed eliminating income tax for earners under $100,000 and imposing a flat 7.5% rate above that threshold [13]. Neither Republican has specified which programs would be cut to offset the revenue loss.

On the Democratic side, Becerra supports higher taxes on the "mega wealthy" and taxing investment income [13]. Porter proposes raising corporate tax rates on high-earning companies and using the revenue to eliminate state income taxes for families earning under $100,000 while covering two years of in-state college tuition [13]. Steyer backs increased commercial property taxes and closing the "water's edge" loophole that lets multinational corporations shelter profits offshore [13]. Mahan has focused on cutting taxes on housing development and gasoline [13]. State Superintendent Tony Thurmond, who also appeared in the debate, is the only candidate supporting a one-time tax on billionaires' assets to backfill federal Medi-Cal cuts [13].

The tension is obvious: expansive housing programs, legal battles with Washington, and new social spending all require money that the state does not currently have.

The Evidence on Housing Regulation: What Research Actually Shows

The debate between progressive and deregulatory approaches to housing is not merely ideological — a substantial body of peer-reviewed research bears on it.

The case against progressive housing mandates: A Manhattan Institute analysis found that inclusionary zoning policies — which require developers to set aside a percentage of units as below-market-rate — resulted in an average 2.1% increase in home prices without corresponding gains in total housing permits [14]. In Minneapolis, an inclusionary zoning ordinance adopted in 2019 produced only seven affordable units in its first six months, against staff projections of 364 to 728 units [15]. Research consistently shows that rent control benefits existing tenants in controlled units but can reduce overall rental supply as landlords convert units to condos or let buildings deteriorate [14].

The case against deregulation as a cure-all: Minneapolis later saw better results from a broader package of reforms — upzoning along transit corridors, eliminating parking minimums, and allowing accessory dwelling units — that added to housing supply and kept rent growth low [15]. But a national study published in the Journal of Urban Affairs in 2025 found that upzoning alone, without complementary policies, does not significantly increase housing density [16]. And in cities that have aggressively upzoned, the benefits have not been evenly distributed: new market-rate construction tends to moderate rents for middle-income households while doing less for low-income renters, and researchers have documented displacement pressures in communities of color as land values rise in newly upzoned neighborhoods [15][16].

The Pew Charitable Trusts credited Minneapolis' success to the combination of zoning reform and inclusionary requirements — suggesting the debate between regulation and deregulation is less binary than candidates on either side acknowledge [15].

Source: BLS / Bureau of Labor Statistics

Data as of Mar 1, 2026CSV

What's at Stake on June 2

California's top-two primary system means only two candidates will advance to November, regardless of party. With five Democrats splitting the progressive and moderate vote, and two Republicans consolidating a smaller but more unified base, the mathematics are precarious for Democrats. A recent poll showed Becerra and Hilton tied at the top [3], raising the prospect of an all-Republican general election in the nation's bluest large state.

The candidates' performances on May 5 offered contrasting visions but few detailed plans. Housing proposals remained at the level of slogans — "build more," "cut red tape," "protect tenants" — without confronting the tradeoffs that research identifies. Immigration positions tracked predictable party lines without engaging the economic data on workforce dependency. And fiscal proposals either lacked revenue math (the Republicans) or relied on new taxes that would require legislative approval and possibly ballot measures (the Democrats).

Source: FRED / Census Bureau

Data as of Mar 1, 2026CSV

What was clear from the debate is that California's next governor will face constraints that no amount of campaign rhetoric can wish away: a housing deficit measured in millions of units, an economy intertwined with immigrant labor, a budget that structural deficits have hollowed out, and a federal government that views the state as an adversary. The question is not whether the next governor will have to make painful tradeoffs — but which ones, and who will bear the costs.