Please ensure Javascript is enabled for purposes of website accessibility
California Budget Still a Quagmire Despite One-Party Rule at Capitol
By admin
Published 2 years ago on
May 16, 2023

Share

Getting your Trinity Audio player ready...

Drafting state budgets in California was once a fairly straightforward exercise in fiscal politics.

The governor’s budget gnomes could fairly accurately predict how much tax revenue would be generated over the forthcoming fiscal year, particularly since most of it would come from taxes on retail sales, a stable base.

Dan Walters with a serious expression

Dan Walters

CalMatters

Opinion

An initial budget was issued in January and it would be revised in May after the April 15 deadline for personal income taxes provided more specificity. Legislative leaders of both parties huddled, sometimes with the governor, and a final budget emerged.

Yes, there were some conflicts. Budgets took two-thirds votes of both legislative houses so the final product needed bipartisan support. Republicans, usually in the minority, would sometimes withhold votes until their demands were met.

Over time, however, the budget process became a political quagmire, in part because the ideological divisions in the Capitol became more pronounced. As Democrats drifted to the left and Republicans to the right, what once was collegial sparring became holy war. But that was not the only factor.

As California’s array of services expanded, so did the number of budget stakeholders seeking larger pieces of the pie or protecting what they had. The field of play became immensely larger after voters passed Proposition 13, the iconic property tax limit, in 1978 and the state became the basic financier of schools and a big factor in local government budgets.

The pie itself changed. The importance of sales taxes in the revenue stream gave way to dominance by personal income taxes, which are inherently less predictable, particularly since most are paid by relatively few taxpayers in upper income tiers.

‘Extreme Budget Volatility’

As Gov. Gavin Newsom’s latest budget proposal, unveiled last week, notes, “California’s progressive tax system, where nearly half of all personal income tax in the state is paid by the top 1% of earners, has contributed to extreme budget volatility over the years.”

That volatility is the chief reason for the budget’s projection of a $31.5 billion deficit just 12 months after Newsom declared that the state had a $97 billion surplus and bragged that “No other state in American history has ever experienced a surplus as large as this.”

Not only have revenues become structurally less predictable, but they also have become subject to changes in national and global economies.

The revised budget’s deficit is projected even without a recession, but were there an even modest downturn – which many economists expect, due to the Federal Reserve System’s sharp hikes in interest rates to battle inflation – the state would take a big hit.

“Based on a moderate recession scenario in fiscal year 2023-24, revenues could decrease by $40 billion in 2023-24 alone, largely driven by losses in personal income tax,” the budget declares. “Revenue declines relative to the May Revision forecast could reach an additional $100 billion through 2026-27.”

Revenue declines of those magnitudes would quickly consume the state’s seemingly hefty “rainy day” reserves.

Budgets no longer require two-thirds legislative votes and Democrats have overwhelming legislative majorities, but that, ironically, is another complicating factor.

Periodic revenue surges, such as last year’s $97 billion paper surplus, whet appetites of Democrats’ allies, such as unions and social welfare and medical care advocates, for additional spending and generate resistance when times get tough.

Newsom’s budget would put the brakes on spending, including clawing back some appropriations from last year. Advocacy groups are leaning on friendly legislators to do whatever is necessary to keep the money flowing, including tax increases and/or tapping into the reserves.

One-party control of the Capitol may change the specifics of fiscal politics, but doesn’t make them any simpler.

About the Author

Dan Walters has been a journalist for nearly 60 years, spending all but a few of those years working for California newspapers. He began his professional career in 1960, at age 16, at the Humboldt Times. For more columns by Walters, go to calmatters.org/commentary.

Make Your Voice Heard

GV Wire encourages vigorous debate from people and organizations on local, state, and national issues. Submit your op-ed to rreed@gvwire.com for consideration. 

 

RELATED TOPICS:

DON'T MISS

What Are Fresno Real Estate Experts Predicting for 2025 and Beyond?

DON'T MISS

First California EV Mandates Hit Automakers This Year. Most Are Not Even Close

DON'T MISS

Fresno County Man Killed in Head-On Collision Identified

DON'T MISS

California Allocates $56 Million to Combat Youth Homelessness

DON'T MISS

Let the Hunt for Fresno County Fruit Trail Delights Begin!

DON'T MISS

Fresno Police Arrest Suspect in Southwest Shooting Through Valley Crime Stoppers’ Tip

DON'T MISS

18 Injured in Knife Attack in Hamburg, Report Says

DON'T MISS

White House National Security Council Hit by More Firings, Sources Say

DON'T MISS

All Six People Aboard Plane That Crashed in San Diego Confirmed Dead

DON'T MISS

Explore the Wild Side of Route 66 With These Natural Wonders

DON'T MISS

Billy Joel Cancels Touring After Being Diagnosed With a Brain Disorder

DON'T MISS

Justice Department Reaches Deal to Allow Boeing to Avoid Prosecution Over 737 Max Crashes

UP NEXT

All Six People Aboard Plane That Crashed in San Diego Confirmed Dead

UP NEXT

Low-Income Compton Students Get $225M State-of-the-Art High School Campus

UP NEXT

Three Well-Tested Ways to Undermine an Autocrat

UP NEXT

Test Your Memorial Day Knowledge With This Quiz

UP NEXT

Will the Pacific Coast Highway Reopen for Memorial Day Weekend?

UP NEXT

Gavin Newsom’s Off-the-Mark Budget Numbers Undermine His Credibility Again

UP NEXT

CA State Senator Cited for Suspicion of Impaired Driving, Says She Wasn’t Intoxicated

UP NEXT

Multiple People on Private Plane That Crashed Into San Diego Neighborhood Are Dead

UP NEXT

Senate Votes to Block California’s Rule Banning the Sale of New Gas-Powered Cars by 2035

UP NEXT

The Coyotes of San Francisco Are the Subject of Great Debate

Fresno Police Arrest Suspect in Southwest Shooting Through Valley Crime Stoppers’ Tip

8 hours ago

18 Injured in Knife Attack in Hamburg, Report Says

9 hours ago

White House National Security Council Hit by More Firings, Sources Say

9 hours ago

All Six People Aboard Plane That Crashed in San Diego Confirmed Dead

10 hours ago

Explore the Wild Side of Route 66 With These Natural Wonders

10 hours ago

Billy Joel Cancels Touring After Being Diagnosed With a Brain Disorder

11 hours ago

Justice Department Reaches Deal to Allow Boeing to Avoid Prosecution Over 737 Max Crashes

11 hours ago

Fresno County Wildland Fire Burns One Acre Before Being Contained

12 hours ago

Clovis Church’s ‘Giving Truck’ Offers Free Coffee With a Twist

12 hours ago

Should Fresno Make It Easier to Convert Office Buildings Into Housing?

12 hours ago

Fresno County Man Killed in Head-On Collision Identified

A 20-year-old Raisin City man was killed early Thursday morning in a head-on collision north of Huntsman Avenue, according to the California...

7 hours ago

fresno
7 hours ago

Fresno County Man Killed in Head-On Collision Identified

8 hours ago

California Allocates $56 Million to Combat Youth Homelessness

8 hours ago

Let the Hunt for Fresno County Fruit Trail Delights Begin!

A Valley Crimes Stoppers tip and surveillance footage led Fresno police to arrest Andy Ramos on Thursday, May 22, 2025, who confessed to a May 11 shooting that left a man hospitalized in stable condition. (Fresno PD)
8 hours ago

Fresno Police Arrest Suspect in Southwest Shooting Through Valley Crime Stoppers’ Tip

Police officers and forensic experts work at Hamburg's main train station, after several people were injured in a knife attack, in Hamburg, Germany, May 23, 2025. REUTERS/Fabian Bimmer
9 hours ago

18 Injured in Knife Attack in Hamburg, Report Says

A view of the White House in Washington, U.S., July 20, 2024. REUTERS/Kevin Mohatt/File Photo
9 hours ago

White House National Security Council Hit by More Firings, Sources Say

Emergency personnel work at the crash scene on a street, after a small civilian aircraft went down in a military neighborhood in San Diego, California, U.S. May 22, 2025. REUTERS/Mike Blake
10 hours ago

All Six People Aboard Plane That Crashed in San Diego Confirmed Dead

10 hours ago

Explore the Wild Side of Route 66 With These Natural Wonders

Help continue the work that gets you the news that matters most.

Search

Send this to a friend