The core mechanism of Chamath’s prediction—that the swing from surplus to deficit would leave Gavin Newsom unable to significantly expand mental‑health and homelessness initiatives—did not hold up, even though the deficit itself was real.

After a near-$100 billion surplus, Newsom’s January 2023 budget indeed projected about a $22.5 billion gap, a dramatic swing. But he explicitly argued the shortfall would not stop major ambitions in areas including homelessness and housing, and his 2023–24 plan continued funding for housing and homelessness programs such as Homekey and encampment resolution grants. (edpolicyinca.org)

Subsequent budgets under continued fiscal stress preserved and expanded homelessness and behavioral‑health spending. The 2024–25 proposal closed a roughly $37.9 billion shortfall while maintaining a multi‑year $15.3 billion homelessness plan, including $400 million for encampment resolution and $1 billion for Homeless Housing, Assistance and Prevention (HHAP) grants—levels described as more than ever before in state history. (gov.ca.gov) In parallel, Newsom put a major behavioral‑health and housing overhaul on the March 2024 ballot (Proposition 1): a $6.4 billion bond plus Mental Health Services Act reforms, intended to build thousands of treatment beds and supportive housing units targeted heavily at people experiencing homelessness. Voters narrowly approved it, and state guidance describes 6,800 new behavioral‑health beds, 26,700 outpatient treatment slots, and 4,350 permanent supportive housing units (over half reserved for veterans). (gov.ca.gov)

Implementation since then confirms this is not a case of being “unable to do any of this stuff.” In May 2025, Newsom announced $3.3 billion in Proposition 1 grants to create more than 5,000 residential treatment beds and over 21,800 outpatient slots for mental‑health and substance‑use care, with a specific focus on people experiencing homelessness. (gov.ca.gov) In February 2025 he also released $920 million in additional state homelessness funding tied to new accountability measures for local governments. (gov.ca.gov) These are large, new (or newly scaled) funding streams, not the absence of expansion.

On outcomes, California’s homelessness problem did get somewhat worse in the short term, but not in the runaway way implied by a state unable to invest. HUD data show California’s homeless population at about 181,399 people in 2023 and roughly 187,084 in January 2024—a roughly 3% statewide increase. (spesmea.org) State and federal summaries characterize this as continued growth but at a slower rate than the national average, with unsheltered homelessness in California rising less than 1% while increasing more sharply elsewhere. (hcd.ca.gov) Preliminary 2025 information is mixed but suggests some local improvement: Newsom’s office highlighted that early 2025 point‑in‑time data from several large communities show declines, and Los Angeles County reported a 4% drop in homelessness in 2025—its second consecutive annual decline—along with a larger fall in unsheltered and chronic homelessness in the City of L.A. (gov.ca.gov)

Netting this out: (1) the specific fiscal claim—that the deficit would prevent Newsom from materially expanding mental‑health and homelessness initiatives—has been clearly falsified by the passage and implementation of large new programs like Proposition 1 and continued multi‑billion‑dollar state homelessness funding; (2) the outcome claim—that homelessness would likely get worse in the near term—was only partially borne out, with a modest statewide increase into 2024 followed by signs of stabilization or improvement in several major jurisdictions by 2025. Because the central budget‑constraint premise is wrong and the worsening of homelessness has been limited rather than driven by an inability to fund initiatives, the overall prediction is best judged wrong.