As California budget crisis explodes, Newsom covets doing same for U.S

 February 22, 2024

This story was originally published by the WND News Center.

SACRAMENTO – When California Gov. Gavin Newsom released his preliminary 2024-25 state budget a month ago, the Legislative Analyst’s Office estimated spending would exceed revenue by a staggering $58 billion. Now, the Analyst’s office has just updated the deficit to $73 billion.

Newsom’s state budget in January called for $291.5 billion in spending, $208.7 billion of that in the general fund and the balance in special funds and bond obligations.

For historical reference, Gov. Pat Brown submitted a record budget in 1962-63 that proposed spending $2.9 billion. That was the entire general fund. Brown was engaged in the creation of the state’s interstate freeway system and the construction of the State Water Project, the last two substantial public works projects undertaken in the Golden State.

Today, however, the $73 billion deficit represents what the current governor would spend if he could print money. But of course, Newsom will not be able to engage in deficit spending – unless he runs for, and is elected to, the presidency of the United States.

So, what are California’s financial options? The obvious one is to raise taxes, though this week the legislative analysis left that topic alone. Instead, they suggested remedies involving accounting maneuvers such as taking money allocated for a specific purpose but not yet spent, and placing it in this fiscal 2024-25 budget to reduce the deficit. The second option suggested is to stop or reduce temporary spending. (Spending is spending and temporary spending is not explained.)

Other suggestions from the legislative office include using emergency reserves or cost cuts in ongoing state operations. The list of possibilities for reduced funding includes Medi-Cal and the California Work Opportunity and Responsibility to Kids program. Some activities, notably climate control and energy, are projected to receive substantial additional tax funding next year, reflecting the priorities of both the state and federal Democrat Party leadership.

There is a pattern to this annual budget dance. The 2021-22 California state budget revenue was $221.7 billion. Its “rainy day” reserve was $81.3 billion. The next year, state revenue dropped to $206.3 billion and the reserve was reduced to $54 billion and change. The current state general fund budget has revenue pegged at $202.4 billion with a $37.8 billion reserve.

The Legislative Analyst’s report said the California economic contraction this year has produced $24 billion less revenue than expected. That reduction in tax payments is ongoing today, so the current 2023-24 budget may face its problems.

California issues what is called the “May revise,” an update on the state’s financial condition in preparation for budget adoption by the legislature in July.

The great unknown will come in late April and May when personal and corporate income taxes are paid. California predicted these taxes would total $51 billion.

The California economy is in serious decline. And Gavin Newsom, who wants to be president of the United States, owns that phenomenon.

State spending, while increasing, is dependent more and more upon huge federal government allocations for costly problems such as COVID-19, housing, homelessness, and border incursions by millions of people. Texas remains the favorite border state of illegals, but California is number two, and much of the California border, particularly in Imperial County, is open space.

But federal programs deliberately fuel state spending. The federal government imposes state participation to receive federal cash, so participation discourages and prevents budget constraints.

If the California economy does not recover and grow, obviously state spending must be curtailed. The alternative, a substantial tax increase, would further suppress the state’s once-robust economy.

All of California’s state constitutional officers are Democrats. The State Senate is controlled by a 32 to 8 margin by Democrats and the Assembly has a Democrat majority of 62 to 18. So the political responsibility for successes and failures is owned entirely by Democrats.

A Legislative Analyst’s Office chart, using 2023-24 budgets projected through 2025-26, shows increases in climate change programs, and a doubling of health, human resources, and public transportation with massive cuts in criminal justice, business, and labor spending.

California voters have tied the hands of the legislature and governor when it comes to education so that funding will be relatively stable.

Bottom line: This week’s analysis of California state government finance has national implications for a governor who is most often touted as a replacement for the ailing president, Joe Biden. How exactly does Gavin Newsom sell a floundering economy and a bankrupt state government as a model for America?

The timing is particularly difficult for Newsom, as his budgetary problems will be making big headlines as California struggles to develop its fiscal plan in July – less than 30 days from the Democratic National Convention being held Aug. 13-16 in Chicago.

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