The new budget — released on May 10 — came just weeks after the California Legislative Analyst’s Office (LAO) increased their estimate for the state’s budget deficit to $73 billion, substantially higher than projections from the Governor’s Office, and a strong reversal from the state’s $100 billion surplus from just two years ago. Analysis from the Hoover Institution attributes the financial crisis to fiscal mismanagement by local and state officials, stating:California Gov. Gavin Newsom has released a revised budget proposal including steep cuts, aiming to close this year’s remaining $27.6 billion budget shortfall and next year’s projected $28.4 billion deficit.
The deficit is the consequence of the state’s unwise and unsustainable choice of enormously expanding spending while its tax base declined. In the four years since February 2020, which was just before COVID restrictions were adopted across the country, California has lost more than 410,000 jobs. In that same four-year period, the rest of the country has added more than 7.3 million jobs. California’s job loss largely reflects the state’s population loss of 472,000 since 2020. But there are also fewer opportunities for those who are still here, as the state’s 5.3 percent unemployment rate is the nation’s highest. A statement from Newsom’s office says the budget shortfall is because of two “separate but related developments” over the past two years:
Newsom made no mention of the number of people who fled California in recent years because of state officials’ policy choices, which led to the soaring cost of living, public safety issues, and increasing homelessness. Because of the exodus, California has lost around $30 billion in taxable income to other states, which Jeff Bellisario, executive director of the Bay Area Council Economic Institute, a pro-business think tank, says played a role in the state’s budget shortfall. Newsom’s latest proposal includes one-time spending cuts of $19.1 billion and perpetual spending cuts of $13.7 billion through fiscal year 2025-26. These cuts include a nearly 8 percent reduction to state operations and the elimination of 10,000 unfilled state positions. As the Associated Press (AP) noted, Newsom has also proposed eliminating in-home care for roughly 14,000 disabled immigrants as well as $550 million that would have helped school districts build additional facilities. Newsom also proposed capping a child-care program for low-income families at 119,000, significantly less than the 146,000 children for whom he previously promised healthcare coverage, the AP reported.
