How California Is Burning a $100 Billion Surplus

What’s wrong with California’s state government leaders?

I know. It’s a long list. Still, the politicians and bureaucrats running California’s state government have outdone themselves. They managed to go from trumpeting their success in achieving a $97.5 billion surplus to digging themselves into a $25 billion deficit hole. It only took them six months.

Cal Matters‘ Emily Hoeven describes the budget whiplash:

$25 billion.

That’s the estimated deficit Gov. Gavin Newsom and state lawmakers will confront when crafting a budget for the upcoming fiscal year, the Legislature’s nonpartisan fiscal advisor announced Wednesday.

The projection marks a stunning reversal from back-to-back years of unprecedented prosperity: The budget for California’s current fiscal year clocked in at a whopping $308 billion, fueled by a record $97 billion surplus that was by itself enough to treat every state resident to a $7,500 vacation. The year before, Newsom and lawmakers approved what was at the time a record-busting $263 billion budget that included a $76 billion surplus.

The Associated Press explains the whiplash didn’t surprise anyone. See if you can tell from this excerpt who is responsible for the state’s change in fiscal fortune:

The report did not surprise Republicans, who said they have been warning against California’s massive increase in public spending for years, with Republican Assembly member Vince Fong calling it “unsustainable.”

“Today’s report is another wake-up call to those warnings. We must refocus on fiscal responsibility,” said Fong, who is vice chair of the Assembly Budget Committee.

Democratic Gov. Gavin Newsom’s administration wasn’t surprised, either, calling the $25 billion deficit estimate “realistic and reasonable.”

Got that? Being $25 billion in the hole is “reasonable.” For its part, California’s Legislative Analyst’s Office says the state needs to put some of its recently approved public spending on hold:

California lawmakers could conceivably cover all of the deficit with the money it has in its savings accounts, but the Legislative Analyst’s Office warned them not to do that. Their outlook predicts deficits not just for this year, but the next three years — although the size of the deficit decreases each year.

Instead, the Legislative Analyst’s Office says lawmakers should delay some of the $75 billion in one-time spending they approved over the past two years. As an example, they pointed to a $500 million program to clean up homeless encampments across the state.

Given Governor Newsom’s track record with his solutions to homelessness, the Legislative Analyst’s Office is all but saying that $500 million would be completely wasted. For what it’s worth, Newsom seems to agree.

But if they were really serious about fixing California’s projected budget deficits, perhaps reducing pension benefits for the state’s politicians and bureaucrats would be a smarter place to begin. Shouldn’t the people most responsible for burning through a $100 billion surplus in six months be the first to feel the pain of spending cuts to fix the deficit they left behind?

Craig Eyermann is a Research Fellow at the Independent Institute.
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