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

Macklin Celebrini, NHL’s Youngest Player, Scores on Marc-Andre Fleury, League’s Oldest

DON'T MISS

Ramsey, Beckham Return to SoFi Stadium When the Struggling Dolphins Visit the Streaking Rams

DON'T MISS

San Francisco’s First Black Female Mayor Concedes to Levi Strauss Heir

DON'T MISS

FBI Thwarts Iranian Murder-for-Hire Plan Targeting Donald Trump

DON'T MISS

Israeli Soccer Fans Were Attacked in Amsterdam. The Violence Was Condemned as Antisemitic

DON'T MISS

Longtime Dodgers Ace Clayton Kershaw Is on the Mend After 2 Surgeries

DON'T MISS

USDA Bans School Lunch Fees for Low-Income Families

DON'T MISS

Christian McCaffrey Expected to Make Season Debut for 49ers This Week

DON'T MISS

Southern California Wildfire Destroys 132 Structures as Officials Look for Fierce Winds to Subside

DON'T MISS

Stock Market Today: Wall Street Cruises Toward the Close of Its Best Week in a Year

UP NEXT

Ramsey, Beckham Return to SoFi Stadium When the Struggling Dolphins Visit the Streaking Rams

UP NEXT

San Francisco’s First Black Female Mayor Concedes to Levi Strauss Heir

UP NEXT

FBI Thwarts Iranian Murder-for-Hire Plan Targeting Donald Trump

UP NEXT

Israeli Soccer Fans Were Attacked in Amsterdam. The Violence Was Condemned as Antisemitic

UP NEXT

Longtime Dodgers Ace Clayton Kershaw Is on the Mend After 2 Surgeries

UP NEXT

USDA Bans School Lunch Fees for Low-Income Families

UP NEXT

Christian McCaffrey Expected to Make Season Debut for 49ers This Week

UP NEXT

Southern California Wildfire Destroys 132 Structures as Officials Look for Fierce Winds to Subside

UP NEXT

Stock Market Today: Wall Street Cruises Toward the Close of Its Best Week in a Year

UP NEXT

The Latest: House Remains in the Balance as World Reaction to Trump Victory Keeps Pouring In

FBI Thwarts Iranian Murder-for-Hire Plan Targeting Donald Trump

1 hour ago

Israeli Soccer Fans Were Attacked in Amsterdam. The Violence Was Condemned as Antisemitic

1 hour ago

Longtime Dodgers Ace Clayton Kershaw Is on the Mend After 2 Surgeries

1 hour ago

USDA Bans School Lunch Fees for Low-Income Families

1 hour ago

Christian McCaffrey Expected to Make Season Debut for 49ers This Week

1 hour ago

Southern California Wildfire Destroys 132 Structures as Officials Look for Fierce Winds to Subside

2 hours ago

Stock Market Today: Wall Street Cruises Toward the Close of Its Best Week in a Year

2 hours ago

The Latest: House Remains in the Balance as World Reaction to Trump Victory Keeps Pouring In

2 hours ago

Middle East Latest: Israeli Defense Minister Officially Steps Down

2 hours ago

Wave of Racist Texts After Election Prompts FBI Scrutiny

2 hours ago

Macklin Celebrini, NHL’s Youngest Player, Scores on Marc-Andre Fleury, League’s Oldest

SAN JOSE — When Marc-Andre Fleury made his NHL debut in 2003, Macklin Celebrini was nearly three years away from being born. On Thursday, th...

36 seconds ago

36 seconds ago

Macklin Celebrini, NHL’s Youngest Player, Scores on Marc-Andre Fleury, League’s Oldest

Rams
21 mins ago

Ramsey, Beckham Return to SoFi Stadium When the Struggling Dolphins Visit the Streaking Rams

1 hour ago

San Francisco’s First Black Female Mayor Concedes to Levi Strauss Heir

1 hour ago

FBI Thwarts Iranian Murder-for-Hire Plan Targeting Donald Trump

1 hour ago

Israeli Soccer Fans Were Attacked in Amsterdam. The Violence Was Condemned as Antisemitic

1 hour ago

Longtime Dodgers Ace Clayton Kershaw Is on the Mend After 2 Surgeries

1 hour ago

USDA Bans School Lunch Fees for Low-Income Families

1 hour ago

Christian McCaffrey Expected to Make Season Debut for 49ers This Week

Search

Send this to a friend