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California State Capitol. (Photo: Kevin Sanders for California Globe)

California Facing $25 Billion Budget Shortfall Next Year

‘This is what you get when a huge chunk of a surplus goes to pet projects and one-time only spending programs’

By Evan Symon, November 16, 2022 4:46 pm

A Legislative Analyst’s Office report released on Wednesday found that California revenue is $41 billion below expectations, likely resulting in a massive $25 billion shortfall in the upcoming 2023-2024 state budget. The LAO recommends lawmakers start cutting the budget when they begin the January session.

Minus a severely affected budget by the COVID-19 pandemic a few years ago that had a $54 billion deficit, California claimed budget surpluses in recent years. This includes last years’ massive $97.5 billion surplus, which was partially caused by previous cuts made, as well as an  expanded tax base returning following the pandemic.

However, multiple factors slowly crept in during the last few hectic years. The California Department of Finance pointed out that revenue for those making $500,000 or above has gone down, with many either leaving the state or now making below that amount due to financial issues. In their report, the LAO said state personal income taxes were down below projections by billions, along with inflation and recession fears fueling losses even more. In addition, experts noted that Tech layoffs and hiring freezes, numerous large companies moving out of the state, the war in Ukraine, inflation, and changing Federal Reserve interest rates and also been grinding the projected deficit even further down.

“The longer inflation persists and the higher the Federal Reserve increases interest rates in response, the greater the risk to the economy,” said the LAO in the report. “The chances that the Federal Reserve can tame inflation without inducing a recession are narrow.”

Assemblyman Anthony Rendon. (Photo: Kevin Sanders for California Globe)

Assembly Speaker Anthony Rendon (D-Lakewood) defended the spending strategy of Governor Gavin Newsom and Democratic lawmakers on Wednesday, noting that they have built a budget designed to withstand such revenue drops and that the state still has $37.2 billion in reserve as a cushion.

“We can and will protect the progress of recent years’ budgets,” said Rendon in a statement on Wednesday. “In particular, the Assembly will protect California’s historic school funding gains, as districts must continue to invest in retaining and recruiting staff to help kids advance and recover from the pandemic.”

Senate Pro Tem Toni Atkins (D-San Diego) also added that the state can avoid tax increases and program cuts this year and basically keep what they have had since last year, explaining that “In the past, tough forecasts like this would have meant painful program cuts and middle class tax increases – things that actually cause more economic harm. That does not have to be the case this year. Thanks to our responsible approach, we are confident that we can protect our progress and craft a state budget without ongoing cuts to schools and other core programs or taxing middle class families. The bottom line is simple: we are prepared to hold onto the gains we’ve made and continue where we left off once our economy and revenues rebound.”

Rendon’s budget keeper specifically showed in a tweet that the total budget would only drop down less than 4%, calling it “Quite manageable in historical terms”.

A $25 billion deficit

Conversely, Republican lawmakers and fiscal experts slammed Democrats and the state for spending so much surplus money without accountability, stressing fiscal responsibility and cutting back spending instead of using reserve cash to fix the hole in the budget.

Assemblyman Vince Fong. (Photo: Kevin Sanders for California Globe)

“As the ruling party continues to spend and grow government programs without accountability, I have repeatedly warned that California’s budget was on an unsustainable path,” said Assemblyman Vince Fong (R-Bakersfield), in a separate statement on Wednesday. “Today’s report is another wake up call to those warnings. We must refocus on fiscal responsibility.”

Randolph Miller, an accountant who specializes in spending cuts on large budgets, including governmental budgets, added in a Globe interview, “This is what you get when a huge chunk of a surplus goes to pet projects and one-time only spending programs rather than saving or helping figure out where to trim the fat. Even worse are the new, longer term programs added that have added to the budget. Everyone knew it was going to be an odd several years of budget issues because of the pandemic, but the state just plain went back to full spending before they could see if it would then go back down.

“Now we have this deficit. The Democrats are playing it cool, like it is no big deal. But it is $25 billion. That’s not pocket change. We overspent last budget despite warnings, and now look where we are. The fiscal advisors to the Democrats either can’t rein in their spending or did not see the writing on the wall.”

As of Wednesday afternoon, Governor Newsom has not yet commented on the deficit, with neither party giving a more comprehensive way to combat the $25 billion hole in next year’s budget.

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30 thoughts on “California Facing $25 Billion Budget Shortfall Next Year

  1. California’s real budget shortfall is probably well over a trillion dollars when unfunded government pension liabilities are considered? Gov. Newsom and Democrats in the legislature aren’t likely to ever acknowledge budget shortfalls of any amount?

    1. Gens XYZ need to wake up to the massive public debt Boomer Democrats ran up in their names who will be stuck paying it off for their entire working lives.

      No wonder the work ethic has been undermined by too many decades of Democrat profligacy, who won’t be around to help Gens XYZ pay this off. Why work, when more and more of one’s paycheck goes to pay off Democrat Boomer spending excesses.

      Just a hint kiddies, they are keeping you “woke”, just so you do not wake up to this gruesome Newsom fact.

      1. Exactly right. Wondering now how best to hypnotize the youngsters to incorporate these important true facts. Maybe hypnosis and brainwashing should not just be a tool of the leftists, but we should also embrace it ASAP.

  2. Anyone ELSE find the timing of this result EXTREMELY suspicious, given that the election was last week???
    Think this might have skewed the election results just a tiny SMIDGE???
    FGN!!!

  3. Did anyone see any roads or potholes repaired during this “surplus”? Communists hate you and your cars and your little lawns

    1. Another upcoming problem is the fact that electric cars and trucks don’t pay taxes to maintain and repair the roads. The burden is placed entirely on gasoline and diesel-powered vehicles. Just wait till a mileage tax is placed on all vehicles and the current gas/diesel powered vehicles have to pay that tax also.

  4. This is what happens when a legislature is dominated by folks with zero real-world work experience, whose work history consists of legislative aide, legislative intern, or community organizer – those who have never balanced a budget, managed anything, and or worked in the private sector.

    The fifth (or sixth) largest economy in the world is under the watchful eye of glorified interns.

    1. And don’t forget California’s surplus of trust fund babies who have never done an honest day’s work in their lives.

      1. Apparently only 17% of the nations wealth comes in the form of inherited wealth. Don’t let class envy color the facts and create unproductive resentments.

        Far larger issues have undermined our nation’s economic health. The legacy of the welfare state being the primary driver of economic entropy. Plus usually by the third generation any inherited wealth has been dissipated and passed on to grifters and con artists. Just like three generations on the welfare system produces utter dystopia.

        Exceptions only to this rule, of course. But even the “mighty” Soviet Union could not outlast three generations of elitist wealth confiscation passing down only to preferred party progeny.

        1. Jaye, I certainly don’t disagree. I was just trying to include the privileged non-working elitists to the list . Think Hunter Biden.

  5. Gee, Gavin looks like it’s gonna be tough to fund all those partial birth abortions that you invited everyone from all over the country to come to CA’s “abortion sanctuary state” to partake in, all expenses paid, including travel and lodging expenses. But I’m sure you’ll find a way.

    1. That was just a ploy to gin up the emotion-addled Roe v. Waders – bet when they try to actually have the procedure, there will be all KINDS of loopholes to prevent women from receiving the procedure, or proper after-care….
      ANOTHER Democrat “bait-n-switch”….

  6. Does this mean California can no longer be a free, all expenses paid, baby-killing tourism state, just like Newsom promised? Where does one register their disappointment.

  7. Too many politicians run as Lady Bountiful candidates, promising favors well beyond any ability or wisdom to actually provide.

    Running as a green eyeshade, blue pencil, sharp budget-balancing tax maven just does not have the same appeal to voters.

    How do we sell thrift and prudence to voters hooked on Democrat crack? How do we name and shame those who sold out our grand-children’s future, and this lost future is not due to “climate change”.

  8. Dear Jaye,
    It will take grassroots action by the voters to change the abominations of ballot harvesting.
    Until the general public puts forth a referendum on voter integrity the pols will keep their power.
    The people must rise up as they have done in the past.

  9. The tale of two Californias.
    “It was the best of times, it was the worst of times, it was the age of wisdom, it was the age of foolishness, it was the epoch of belief, it was the epoch of incredulity…”
    Ahh, imagine Dickens could have seen this one coming!
    Newsom how did you think this would turn out? You kept this state closed for 2 years forced Small Businesses from reopening! Poof go the expected tax dollars.
    Where to cut first is the question!

    1. A Tale of Two Cities could have all sorts of interesting parallels to modern day California. As I recall it does not end well for the elites.

      1. Yes, it does not end well CW.
        There is a reason the teacher unions and school boards have rid our schools of classic literature. Dumb down society and take away critical thinking and we end up right here!

  10. Yeah, because that “surplus” money was never real to begin with. It was all fake “pandemic” money that allowed them the illusion of a so-called surplus and to be able to say to the brainwashed and ignorant, “Look how well we have managed everything, sheeples.” Did you really think that Commiefornia was going to be honest about the real economic state we are in these past several years? Like someone else said, the timing of this announcement right after the “elections” is just a little obvious.

  11. So good to know that all the people who left comments on this are out there. They truly understand where California really is. 100% agreement with all the comments, they are all 100% correct.

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