Great news!!! Sometime in the future California will have a BALANCED BUDGET. Yup, sometime in the future the Dallas Cowboys will win a football game. Definitely, in the future, Republicans will take back the Governors office and the legislature—sometime in the future.
But this year State revenues were UP by $8 billion—while State spending went up by $10 billion over plans.
“However, the office anticipates deficits reaching $20 billion and $30 billion in the following years.
Governor Gavin Newsom is expected to reveal his budget in early January, though the Department of Finance in a statement to Courthouse News called the report a reasonable starting point for budget talks next year.
Of course none of this counts the hundreds of billions in repairs we are not doing, the over $1 trillion in unfunded liabilities for CalPERS, CalSTRS and the State health program. It does not count the tens of billions spent each year on illegal aliens or the $24 billion unaccounted for being spent on the government created homeless crisis.
California analyst sees balanced budget in upcoming fiscal year
While the analyst called the anticipated budget ‘in fair condition,’ he expects large deficits in the following fiscal years.
Alan Riquelmy , Courthousenews, 11/20/24 https://www.courthousenews.com/california-analyst-sees-balanced-budget-in-upcoming-fiscal-year/
SACRAMENTO, Calif. (CN) — California’s budget for fiscal year 2025-26 appears roughly balanced but there’s no wiggle room for additional financial commitments, the state’s legislative analyst said in a Wednesday report.
The assessment by the state Legislative Analyst’s Office shows that California will have a $2 billion deficit for the upcoming fiscal year. Given the size of the budget, the analyst’s office considered it balanced.
“If a budget problem of this magnitude were to materialize by the end of the budget process in June, relatively minor budget solutions would be needed,” the analyst wrote of the $2 billion deficit estimate.
However, the office anticipates deficits reaching $20 billion and $30 billion in the following years.
Governor Gavin Newsom is expected to reveal his budget in early January, though the Department of Finance in a statement to Courthouse News called the report a reasonable starting point for budget talks next year.
Gabriel Petek, the legislative analyst, said Wednesday that the $2 billion deficit is uncertain. His office assumed some, but not all, of about $2.2 billion in savings from governmental efficiencies and unfilled state jobs in the fiscal year 2024-25 budget. Also, a new minimum wage for health care workers began in October and its impacts are uncertain.
The office pointed to a handful of factors for the state using black ink on its financial ledger, with revenues climbing by $7 billion.
Governor Gavin Newsom and lawmakers made a point of addressing deficits in both the current fiscal year as well as the upcoming one. That meant some $11 billion in spending maneuvers, $5.5 billion in temporary revenue increases and taking $7 billion from the state’s rainy-day fund, the office said.
Additionally, a strong stock market has driven the earnings of high-income residents, despite a softer labor market and consumer spending. That’s led to a related uptick in income tax collections for the state.
“We’re characterizing the budget as being in fair condition,” Petek said.
However, the analyst’s office said revenue bounces linked to the stock market led it to question its sustainability if no other improvements to California’s broader economy appear. Revenues are ahead of current budget assumptions, though they’re offset by budgetary spending increases.
The office cautioned that its fair picture of the upcoming budget includes the appearance of double-digit deficits in the years beyond. Based on past standards, it foresees spending increasing by 5.8% from 2025-26 to 2028-29, as opposed to a 3.5% average.
In comparison, revenue is only expected to grow around 4% over that time frame. That’s lower than the historical average, mostly because of policy decisions ending during those years.
While Petek anticipates higher revenue for this upcoming fiscal year, that translates to more spending on schools and community colleges because of Proposition 98, which links state revenues to spending on schools. Additionally, the recently passed Proposition 35 — which will make an existing temporary tax on managed health care insurance plans permanent — will lead to more required spending, Petek said.
The analyst’s report points to an anticipated deficit of $20 billion in fiscal year 2026-27 and deficits of almost $30 billion in both fiscal years 2027-28 and 2028-29.
The size of those deficits means California doesn’t have the ability now to make new financial commitments without also taking steps like reducing spending or raising taxes.
That potentially sets Newsom’s call for a special legislative session to Donald Trump-proof the state on a collision course with the budget.
Newsom called the special session two days after Trump’s presidential win over Vice President Kamala Harris. State Senator Scott Wiener, a San Francisco Democrat and chair of his chamber’s Budget and Fiscal Review Committee, has said lawmakers will allocate funds to the state Department of Justice to fund the state’s legal defense against Trump administration attacks, as well as any litigation against unlawful federal action.
The governor has said the special session is needed to shore up defense for essential freedoms and individual rights, including for women and the LGBTQ+ community.
Assembly Speaker Robert Rivas, a Salinas Democrat, in a Wednesday statement called for fiscal restraint, pointing to potential challenges from a Trump administration.
“It’s not a moment for expanding programs, but for protecting and preserving services that truly benefit all Californians,” Rivas said.
Assemblymember James Gallagher, a Yuba City Republican and his chamber’s minority leader, pointed in a statement to the large deficits in future fiscal years.
“California is the highest-tax state in the country, yet we are still facing multibillion-dollar deficits well into the future,” Gallagher said. “Democrats got us into this mess and I have no confidence in their ability to fix things without inflicting real pain on Californians.”
State Senator Roger Niello, a Fair Oaks Republican and vice chair of the budget committee, told Courthouse News that he summarized the analyst’s report as “good news, bad news.”
The upcoming fiscal year will be a far cry from the massive deficit lawmakers first faced at the start of this year. However, Niello pointed to the anticipated deficits in future years, calling them a huge problem.
He said the state needs more oversight over its programs, which could lead to spending cuts in those found lacking.
