Will Gov. Gavin Newsom Face a Reckoning with His $73B Deficit in the $330 Billion Budget?

When are budget cuts not really budget cuts? When they are in Gov. Gavin Newsom’s budget.

California has a budget deficit of $73 billion, the Legislative Analyst’s Office reports. Gov. Newsom claimed the budget deficit was only $30 billion in January. So who is right – the nonpartisan LAO or Gov. Newsom who isn’t running for president?

Last week Newsom and elected legislative Democrats released details of their plan to cut more than $17 billion in spending:

“The package includes solutions that would enable final budget negotiations to focus on closing the gap and protecting core programs, and agrees to aim for using approximately half of the reserves this year,” Gov. Newsom said.

But let’s back up.

It is important to remember that when Gov. Jerry Brown was (re)elected in 2011, the state budget was $98 billion. The state’s population was a little over 38 million. Brown doubled the budget to $199.3 billion in 8 years – with no measurable increase in population. Gov. Gavin Newsom inherited Brown’s $199.3 billion budget, and has grown it to $330 billion in 5 years – while losing population.

When Gov. Jerry Brown was elected in 2011, the state budget was $98 billion. The state’s population was a little over 38 million. Brown doubled the budget to $199.3 billion – with no measurable increase in population. Gov. Newsom inherited Brown’s $199.3 billion budget, and has…

— Katy Grimes (@KATYSaccitizen) December 5, 2023

Where is all of that new spending going? And how exactly will the governor and Democrats cut $17 billion in spending?

Here’s how, from Gov. Newsom’s Early Action Agreement Overview:

“There is agreement between the Governor and the Legislature on an Early Action
budget package that will reduce the budget shortfall by approximately $17.3 billion.
High-level details of this Early Action agreement are outlined below.
The Early Action agreement includes $17.3 billion in a mix of solutions, which are
primarily a subset of Governor’s Budget solutions:”

Reductions are actual reductions. The rest – borrowing, delays, fund shifts and deferrals – are just budget trickery, other than more borrowing, which is rarely good. These are the proposed reductions:

Reductions – $3.6 billion – Significant Issues Include:
 Salary Savings Sweep from Vacant Positions – $762.5 million.
 Withdraw Elimination of Two-week Fee-For-Service Checkwrite Hold – $532.5
million.
 School Facility Aid Program – $500 million.
 CalWORKs Single Allocation Partial Reversion – $336.6 million.
 UCLA Institute of Immunology and Immunotherapy Project – $300 million.
 Watershed Climate Resilience – $206.5 million.
 Broadband – Loan Loss Reserve – $150 million.
 Climate Innovation Program – $100 million.
 Foreclosure Intervention Housing Preservation Program – $85 million.

Only in government is it possible to claim “$762.5 million salary savings” from unused vacant positions. If the positions are vacant, then there isn’t spending taking place – funding is only allotted.

However, there is good news: Newsom announced he will “freeze additional one-time funding that was included in the 2021, 2022, or 2023 Budget Acts.” While one-time funding never should have taken place – especially during Newsom’s COVID lockdowns – it’s good that it is on the chopping block as cuts are necessary.

“I thank our legislative leaders for their partnership in taking this major step to address the shortfall with a balanced approach that meets the needs of Californians and maintains a strong fiscal foundation for the state’s future,” Gov. Newsom said in a press statement. “We are able to meet this challenge thanks to our responsible fiscal stewardship over the past years, including record budget reserves of close to $38 billion.”

It was only in January when Gov. Newsom put on quite a budget show, feigning indignation over the Legislative Analyst’s Office’s update on the state’s actual budget deficit, which the LAO put at $68 billion, and then increased to $73 billion. Newsom claimed the LAO was wrong about the size of his budget deficit.

By January 10th, Newsom’s $330 billion budget was whittled down to a svelte $291.5 billion – but no cuts to his climate agenda. Notably, Gov. Newsom made a truly strange comment: “Extreme weather patterns led to extreme budgeting.”

The most preposterous statement Gov. Newsom made may be, “Belt tightening – “we did what you do at home.”

Assembly Republican Leader James Gallagher wasn’t buying Gov. Newsom’s claims of belt-tightening, much less on the early action budget deal.

“This deal is a swing and a miss from Democrats. California’s budget has major league problems and Newsom is proposing JV solutions. With a $73 billion deficit, this gimmicky agreement is not the home run Gavin thinks it is. The emotional, real truth of this budget is visceral to the Californians who will pay the price for Newsom’s delusions and exaggerations.”

“The economic slowdown, caused by the state’s highest unemployment in the nation after recent data revealed that job growth in the Golden State was much lower in 2023 than previously believed, is largely to blame for the shortfall,” Fox News reported. “The exodus of businesses and residents from the state for more tax-friendly states is also a contributing factor. California relies heavily on income taxes for its revenue.”

The U-Hauls leaving California in 2023 marked the fourth consecutive year the once Golden State finished on top of the U-Haul Growth Index – meaning more Californians rented one-way U-Haul trucks to leave the state in 2023, than residents of any other state, the Globe reported in January.

In 2022, 817,000 Californians moved to other states.

California also lost a net of 407,000 residents to other states between July 2021 and July 2022, including a greater share of those with a college degree and residents at all income levels than in the past.

The $300 billion budget is going to take a lot more reductions. A good place to start is with homeless spending and taxpayer funded entitlements for those in the state illegally.

A new state audit reports that California has also spent more than $24 billion on the state’s drug-addicted homeless vagrants, growing the homeless population to more than 181,000.

As the Globe recently reported, Gov. Gavin Newsom’s final expansion of full-scope Medi-Cal went into effect Monday, January 1, 2024, making more than 700,000 illegal immigrants residents between ages 26 and 49 eligible for full health care coverage – at a very precarious time with his $68 billion budget deficit.

If Gavin Newsom and the state’s Democrats – who surely flunked basic math – are trying to bankrupt the state, they are going about it correctly. This latest expansion of Medi-Cal will cost  $2.6 billion annually on top of the $330 billion budget.

And notably, California is the only state in the country to fund health care for illegal immigrants. As California Congressman Kevin Kiley says, “California is a model of exactly what not to do when it comes to managing a state’s finances and managing its tax system and spending.”