Gov. Newsom’s Office Insists Budget is ‘Balanced’ – No Deficit

Did you know that Governor Gavin Newsom’s budget is balanced? That the governor’s budget does not have a $55 million to $80 million deficit?

Neither did I until Gov. Newsom’s Deputy Director for Rapid Response Brandon Richards (He/Him) contacted the Globe again this week  with a “Request for Correction – False Information Included.”

Brandon Richards (He/Him) sent this email:

Katy,

Good morning! I wanted to reach out about this article:

https://californiaglobe.com/articles/california-democrats-plan-to-give-illegal-immigrants-taxpayer-funds-to-purchase-a-home/

It is factually inaccurate to say that there is a budget deficit in California.

FACT: On June 29^th, 2024 Governor Newsom signed a budget that is balanced over this current fiscal year (which began July 1) and the next fiscal year (which begins July 1, 2025 and ends June 30, 2026). Given we are now in August, that means we are well into the new fiscal year and operating under a balanced budget.

Hoping you can update the article to reflect this fact.

• Here is the release announcing this: https://www.gov.ca.gov/2024/06/29/governor-newsom-signs-2024-state-budget-supporting-fiscal-stability-and-core-programs/

And additionally, I want to point out that the state’s Department of Finance just this month said:

• Preliminary General Fund agency cash receipts were $983 million, or 10.1 percent, above the Budget Act forecast for July,

Thank you for taking quick action.

Best,

Brandon

BRANDON RICHARDS (He/Him)

Deputy Director for Rapid Response

Office of Governor Gavin Newsom

The Globe article was about Assembly Bill 1840, which would give California taxpayer dollars to illegal immigrants to help them purchase a home – up to $150,000 of taxpayer funds. The Globe spoke with and quoted Senator Brian Dahle who accurately said, “California is struggling with a multi-billion dollar deficit, and numerous housing and homelessness programs providing vital assistance to so many struggling Californians face budget cuts. AB 1840 would short-change veterans even more.”

Senator Dahle is clearly on solid ground, a Capitol staffer told the Globe. Sen. Dahle would know since he serves on the budget committee. The state budget may be declared balanced – on paper – by the Governor’s appointees at the Department of Finance, but they play that game every year. The reality is that Gov. Newsom’s Administration consistently underestimates short and long term costs and debts – including the $1.5+ Trillion unfunded public employee pension and health obligations, the Unemployment Insurance loan repayments, and the more than $300 billion High Speed Rail estimate former Senate Transportation Committee Chair Mark DeSaulnier (D) provided – just a few examples.

And we can’t leave out the Newsom administration’s often over-estimates of expected revenues.

“Thanks to careful stewardship of the budget over the past few years, we’re able to meet this moment while protecting our progress on housing, homelessness, education, health care and other priorities that matter deeply to Californians. I thank the Legislature for their partnership in delivering this sound and balanced plan,” Gov. Gavin Newsom said June 29th while dislocating his shoulder while patting himself on the back.

As the budget process was wrapping up in June, Senate Republicans issued their own statement and analysis:

…legislative Democrats passed a budget package that is not balanced, not sustainable, and not representative of the needs of everyday Californians.

The budget, crafted last week during closed-door meetings with the governor and a select few Democrat legislators, continues their fiscal mismanagement of taxpayer dollars.

“This budget package is nominally balanced but not sustainable. It fails to reign in the past decade of irresponsible growth in government spending,” said Senator Roger Niello (R-Fair Oaks) who serves as vice-chair of the Senate Committee on Budget and Fiscal Review. “It relies on budget gimmicks, draws down our savings, and saddles future generations with debt.”

Senate Republicans also issued their own budget summary in July:

The newly enacted budget would spend nearly $212 billion General Fund in 2024-25, a decline of about $12 billion from the prior year. Despite the deficit, the budget would still spend $16 billion General Fund more than the level seen just two years ago in 2022-23. The three future years included in the forecast would continue that long-term growth trend in spending, which would exceed revenues throughout that timeframe and likely longer. The budget is precariously balanced through 2025-26, but only on paper while using the Governor’s more optimistic tax revenue assumptions and ignoring billions in spending that is likely to occur. The enacted spending path is on pace to create operating deficits of $14 billion in 2026-27 and $18 billion in 2027-28, even without a decline in revenue or further increase in spending (emphasis the Globe).

In addition, the borrowing of funds from future years and similarly the rolling over of costs from one year into future multiple years is questionable, a Capitol staffer told the Globe. “The Newsom Administration seems to be working on a three or more year budgeting cycle so of course there will never be a deficit in the ‘current’ fiscal year.”

Senate Republicans’ analysis continues:

Governor’s Deficit Differs from Nonpartisan [Legislative Analyst’s] Estimate and Is Likely Understated. Defining the deficit has proven unexpectedly difficult. The Governor’s January deficit estimate of $38 billion was markedly lower than the $68 billion projection offered by the nonpartisan Legislative Analyst’s Office (LAO) at that time. In February, the LAO updated its deficit estimate to $73 billion, following weaker-than-expected tax revenue receipts in December and January. The enacted budget purportedly solves a deficit of $47 billion, though the LAO estimated that the Governor’s May Revision addressed a $55 billion deficit under more typical accounting methods. In turn, the LAO updated its own deficit forecast, which indicates the new deficit total is about $62 billion.

The primary differences between the Governor’s and LAO’s estimates are that (1) the Governor assumes revenues would be $6 billion higher than the LAO, before accounting for the tax policy changes, and (2) the Governor preemptively removed some solution proposals from the deficit calculation, even though those solutions were not part of the budget “baseline.” This unusual accounting included pre-counting an eventual $6 billion education borrowing scheme. The Governor’s atypical accounting approach arguably reduces the size of the deficit artificially.

You get the picture. Whether we call these accounting gimmicks and tricks or budget obfuscation, the truth is different from what Governor Newsom and his Department of Finance claim is “balanced” or “brings stability to state finances.”

And Brandon Richards (He/Him) is full of it. Democrats seem so comfortable lying about policies and budgets, and gaslighting these days.

I hope he’s having fun because I look forward to his emails. They are entertaining.