Please ensure Javascript is enabled for purposes of website accessibility
Newsom, Legislators Opt for Gimmicks and Wishful Thinking to Close California’s Budget Deficit
dan_walters
By Dan Walters, CalMatters Commentary
Published 8 months ago on
March 26, 2024

Gov. Gavin Newsom and California legislators are using accounting tactics to address the state's budget deficit, potentially worsening the situation. (CalMatters/Miguel Gutierrez Jr.)

Share

Getting your Trinity Audio player ready...

Gov. Gavin Newsom and his fellow Democrats in the Legislature spent their way into a massive state budget deficit by assuming that a one-time surge in revenues would become a permanent cornucopia of money to expand medical and social services.

Dan Walters Profile Picture
Dan Walters

CalMatters

Opinion

As revenues flattened, particularly all-important personal income taxes, the gap between income and outgo could no longer be ignored. In January, Newsom pegged the deficit at $38 billion as he proposed a 2024-25 budget.

The Legislature’s budget analyst, Gabe Petek, calculated that the real deficit over the remainder of the current fiscal year and through 2024-25 is many billions of dollars higher, perhaps as much as $70 billion, and warned legislators that the state faces annual deficits in the $30 billion range for the remaining three years of Newsom’s governorship.

“The state faces significant operating deficits in the coming years, which are the result of lower revenue estimates, as well as increased cost pressures,” Petek said in his analysis of Newsom’s budget. “These deficits are somewhat compounded by the governor’s budget proposals to delay spending to future years and add billions in new discretionary proposals. State revenues in the out-years would need to exceed the administration’s forecast by roughly $50 billion per year in order to sustain the spending proposed by the governor’s budget.”

The Proposed Solutions

So far, Newsom and legislative leaders are ignoring Petek’s advice and are using wishful thinking, accounting gimmicks and borrowed money to fashion a budget they will portray as balanced, but would, as Petek says, make the state’s fiscal predicament even worse in future years.

The duplicity begins with assuming that the deficit is billions of dollars smaller than Petek’s estimate. It continues with an agreement to enact “budget solutions worth $12 to $18 billion to address the shortfall” this spring.

Those “solutions” are laid out in Newsom’s budget and a “Shrink the Shortfall” proposal from state Senate leaders. They consist largely of temporarily suspending some of the appropriations in the 2023-24 budget that was adopted last June, shifting some spending from the general fund into special funds, borrowing from various pots of money, and tapping into reserves.

Newsom termed it “a balanced approach that will take a significant chunk out of the projected shortfall.”

The Consequences

They are the sort of things that California’s politicians have embraced during previous budget crises to avoid either concrete reductions of spending or new taxes, akin to financially stressed families running up their credit cards, stiffing some creditors and tapping relatives for loans.

Were California experiencing only as temporary gap due to recession, a case could be made for a jerry-rigged budget to minimize impacts on those who depend on money flowing from Sacramento. However, the state faces what budget mavens call a “structural deficit,” meaning there is a fundamental imbalance disconnected from the state’s overall economy.

The deficit is born of Newsom’s 2022 declaration that the state was enjoying a $97.5 billion surplus, thanks largely to a $54.8 billion projected uptick in revenues. “No other state in American history has ever experienced a surplus as large as this,” Newsom bragged.

The surplus never materialized. It was an illusion stemming from an overly enthusiastic response to tens of billions of one-time dollars pumped into the state’s economy by federal pandemic relief programs. The bubble quickly burst but politicians had already spent many of the phantom dollars.

The deficit is a gut-check for Newsom and legislators. They could summon the political courage to deal with it as a serious fiscal crisis, or they could – and probably will – pretend to close the gap on paper and kick the can down the road.

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. CalMatters is a public interest journalism venture committed to explaining how California’s state Capitol works and why it matters. For more columns by Dan 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 bmcewen@gvwire.com for consideration.

RELATED TOPICS:

DON'T MISS

Rams Again Fall Flat in Prime Time, Blow Chance to Move Atop NFC West

DON'T MISS

Controversy Surrounds San Jose State’s Volleyball Tournament Seeding Amid Boycotts

DON'T MISS

NBC’s Mike Tirico Calls Eagles-Rams Game After Suffering Achilles Injury

DON'T MISS

In California’s Heartland of Fresno, Some Latino Immigrants Back Trump’s Border Stance

DON'T MISS

Alabama, Mississippi Fall Out of Top 10 While Oregon Remains Unanimous No. 1

DON'T MISS

UCLA Stuns No. 1 South Carolina, Snaps Gamecocks’ 43-Game Win Streak

DON'T MISS

Californians Pay Sky-High Utility Rates While Subsidizing Out-of-State Residents

DON'T MISS

Father Arrested After Merced Toddler Dies in Unsecured Firearm Accident

DON'T MISS

Gov. Newsom: California Could Offer Electric Vehicle Rebates if Trump Eliminates Tax Credit

DON'T MISS

Josh Jacobs Runs for 3 TDs as Packers Roll Past Short-Handed 49ers

UP NEXT

Controversy Surrounds San Jose State’s Volleyball Tournament Seeding Amid Boycotts

UP NEXT

NBC’s Mike Tirico Calls Eagles-Rams Game After Suffering Achilles Injury

UP NEXT

In California’s Heartland of Fresno, Some Latino Immigrants Back Trump’s Border Stance

UP NEXT

Alabama, Mississippi Fall Out of Top 10 While Oregon Remains Unanimous No. 1

UP NEXT

UCLA Stuns No. 1 South Carolina, Snaps Gamecocks’ 43-Game Win Streak

UP NEXT

Californians Pay Sky-High Utility Rates While Subsidizing Out-of-State Residents

UP NEXT

Father Arrested After Merced Toddler Dies in Unsecured Firearm Accident

UP NEXT

Gov. Newsom: California Could Offer Electric Vehicle Rebates if Trump Eliminates Tax Credit

UP NEXT

Josh Jacobs Runs for 3 TDs as Packers Roll Past Short-Handed 49ers

UP NEXT

Israeli Ambassador to US Says Hezbollah Ceasefire Deal Could Come ‘Within Days’

In California’s Heartland of Fresno, Some Latino Immigrants Back Trump’s Border Stance

19 minutes ago

Alabama, Mississippi Fall Out of Top 10 While Oregon Remains Unanimous No. 1

21 minutes ago

UCLA Stuns No. 1 South Carolina, Snaps Gamecocks’ 43-Game Win Streak

24 minutes ago

Californians Pay Sky-High Utility Rates While Subsidizing Out-of-State Residents

32 minutes ago

Father Arrested After Merced Toddler Dies in Unsecured Firearm Accident

43 minutes ago

Gov. Newsom: California Could Offer Electric Vehicle Rebates if Trump Eliminates Tax Credit

1 hour ago

Josh Jacobs Runs for 3 TDs as Packers Roll Past Short-Handed 49ers

1 hour ago

Israeli Ambassador to US Says Hezbollah Ceasefire Deal Could Come ‘Within Days’

1 hour ago

Russia Reportedly Captures a Briton Fighting for Ukraine as Russian Troops Advance

1 hour ago

Forecasts Warn of Possible Winter Storms Across US During Thanksgiving Week

2 hours ago

Rams Again Fall Flat in Prime Time, Blow Chance to Move Atop NFC West

INGLEWOOD — For the second time in three weeks, the Los Angeles Rams went into a game knowing a win would move them into a tie for the NFC W...

6 minutes ago

6 minutes ago

Rams Again Fall Flat in Prime Time, Blow Chance to Move Atop NFC West

15 minutes ago

Controversy Surrounds San Jose State’s Volleyball Tournament Seeding Amid Boycotts

18 minutes ago

NBC’s Mike Tirico Calls Eagles-Rams Game After Suffering Achilles Injury

A bus stop in Fresno, Calif., on Nov. 14, 2024. Fresno County voted for a Republican presidential candidate this year for the first time in two decades. (Mark Abramson/The New York Times)
19 minutes ago

In California’s Heartland of Fresno, Some Latino Immigrants Back Trump’s Border Stance

21 minutes ago

Alabama, Mississippi Fall Out of Top 10 While Oregon Remains Unanimous No. 1

24 minutes ago

UCLA Stuns No. 1 South Carolina, Snaps Gamecocks’ 43-Game Win Streak

32 minutes ago

Californians Pay Sky-High Utility Rates While Subsidizing Out-of-State Residents

43 minutes ago

Father Arrested After Merced Toddler Dies in Unsecured Firearm Accident

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

Search

Send this to a friend