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It seems like just yesterday that Gov. Gavin Newsom and state legislators enacted a state budget that papered over a $20 billion gap between income and outgo while blaming President Donald Trump for their fiscal dilemma.
It was, in fact, less than four months ago that Newsom signed the $321 billion, 2025-26 budget, saying, “As we confront Donald Trump’s economic sabotage, this budget agreement proves California won’t just hold the line — we’ll go even further. It’s balanced, it maintains substantial reserves, and it’s focused on supporting Californians — slashing red tape and catapulting housing and infrastructure development, preserving essential healthcare services, funds universal pre-K, and cuts taxes for veterans.”
Trump, however, had nothing to do with what state officials have described as a “structural deficit,” meaning that spending encased in current law outstrips revenue expectations. Rather, it stems from what officialdom later acknowledged as a $165 billion error in revenue projections in 2022 that fueled Newsom’s boast of having a $97.5 billion surplus. That, in turn, resulted in a sharp increase in spending.
When the surplus was exposed as a phantom, the state was stuck with a chronic income/outgo gap that persists. To cover it this year, Newsom and legislators tapped emergency reserves, borrowed money from the state treasury’s special funds, postponed some spending and engaged in some accounting gimmickry.
On Thursday, the Legislative Analyst Office pegged the budget’s total borrowing — on and off the books — at $21 billion.
Although this budget is less than 4 months old, the annual budgetary cycle will soon begin anew.
The Legislature’s budget analyst, Gabe Petek, will issue his annual overview of the state’s finances in a few weeks, followed in December by the Department of Finance’s finalization of parameters and Newsom’s decisions on how to spend what money he assumes the state will have, and in January by the introduction of the first draft of a 2026-27 plan.
It will be Newsom’s final budget before his second and final term as governor ends 14 months hence and he very likely embarks on a campaign for the White House.
All indications point to another year of coping with a multibillion-dollar deficit. Major revenues have been running a few billion dollars ahead of estimates in the current budget, but not nearly enough to markedly shrink the structural deficit.
Normally there is plenty to say about this ongoing insanity in Sacramento.
Mr. Walters has said it well.
Re-read this and then tell the world how stupid you are if you voted for them.