Op-Ed: Newsom, legislators opt for gimmicks and wishful thinking to close California’s budget deficit

The state Capitol on June 24, 2022. Photo by Miguel Gutierrez Jr., CalMatters

By Dan Walters | CalMatters Commentary

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.

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 higherperhaps 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.”

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.”

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.

This article originally appeared at calmatters.org

Op-Ed’s are written by community members, not representatives of edhat. The views and opinions expressed in Op-Ed articles are those of the author’s.

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Written by CalMatters

CalMatters.org is a nonprofit, nonpartisan media venture explaining California policies and politics. (Articles are published in partnership with edhat.com)

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  1. I am shocked this article was allowed as it exposes the truth about failed democrat policy in California, going against the usual lefty lib narrative they push that would conceal it. Thank you for doing so, even if this is the one and only time it happens.

    • STEVE-O – if you bother to read a news source other than Parler, et al, you’d see all the “left” media (eg, CNN, NYT, etc) still run articles about “failures” by left leaning politicians. The “cover ups” that the right constantly cry about don’t exist.

    • CalMatters may lean left but they have a very good factual reputation. Dan Walters has always been right leaning; he was syndicated in the SB News Press before the witch bought it.
      (Speaking of which witch, edhat will probably publish an update on Wendy, other papers have. She’s almost unbelievably terrible; still surprising me with the depths to which she sinks.)

      “Overall, we rate CalMatters.org Left-Center Biased based on editorial positions that moderately favor a liberal perspective. We also rate them High for factual reporting due to proper sourcing and a clean fact-check record.

      Detailed Report:
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  2. As long as the majority of voters keep buying into the narrative from the tax-and-spend pols, and continue to elect them, we will continue on this path. It will take some painful corrective actions to undo where we now find ourselves. That said, as Walters stated, I don’t expect things to improve…

      • The elected officials themselves have no culpability then? Voters vote for who they think is best for the job or to keep someone they think is awful away from the job. What those elected officials then do is not always something those who voted for them accept or approve of. Far more to blame than putting it “100%” on the voters.

        • You misread. Perhaps I wasn’t clear – but there is a period in between. 100% meaning in agreement with the previous post. It’s up to voters to choose differently, should they wish to look for a different path, that’s all. Of course elected officials bear responsibility.

      • Uh, wrong.
        California laws regarding license plates state that all passenger vehicles must include both a front and rear license plate. Both license plates must be clearly visible with no alterations that obscure the state, plate number, or registration and must be securely fastened to prevent the plates from swinging.

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