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

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.

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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.”

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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.

Click here to read the full article in CalMatters

Comments

  1. I believe Newsome and his cohorts are counting on a windfall of tax dollars from the fast food workers new $20 an hour wage.

    • I know you are saying this tongue in cheek, so I will go along with that. $20 an hour from 1/2 of the present work force after the other 1/2 is laid off, will make a 1/4 reduction in State income tax. I’m so glad I got out of that state in 2016.

  2. The mirage of a “surplus” has been erased by bitter reality.

    Newsom is a liar and thief. You will get no solutions from him as he is only interested in political optics over real solutions for California. Only an idiot would increase minimum wages and give away free health care to non citizens in the face of the growing recession.

    Years of radical Democrat control in Sacramento have slowly but steadily destroyed the basis of the states economy. The consequences of poor decisions are now rapidly appearing everywhere.

    Every citizen in California is going to pay for their poor leadership. Remember when they shut down the economy and criticized other states for remaining open? Newsom cannot even be honest about that. We have the highest taxes in the country, most expensive and ineffective education system. These radicals are going to just increase the fees and taxes.

  3. The fact that Newsom and Democrat mono-party swamp creatures are tone deaf to reality.

    Power is all they seek, for if they are in power, law, common sense, morality, ethics are all ignored. They must at all times, worship their partisan power structure.

    The people, and reality, be ignored.

  4. Donald J. says

    The real problem is common sense cannot be explained to the tone deaf voters of the Left. They actually believed what they were indoctrinated in the Government education system (propaganda) and the various cp controlled unions that extract a portion of their income to feed back to the party of the left from their protection racket. Over 53% of supposed Californians pay zero in taxes and in one way or another let their working neighbors contribute to their free lunch. They will never vote for common sense solutions in which they must contribute.

  5. Democraps like to spend spend spend to try and stay in power…They are nothing more then “Pathetic little people”…..

  6. MICHAEL PISTORESI says

    With more and more people with money leaving the state the problem will only get worse over time, particularly as we are overrun by illegals expecting and receiving a “free lunch”..

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