Is Newsom Overestimating CA Government Revenues Again?

"Four years ago, as the state's economy rebounded from a pandemic-caused downturn, the state's revenues saw a brief upward spike. Someone in the administration, perhaps Newsom himself, decided that the revenue jump would be permanent and that it meant a $97.5 billion surplus over several years. "No other state in American history has ever experienced a surplus as large as this," Newsom bragged as he unveiled a 2022-23 fiscal year budget that topped $300 billion. Newsom's declaration touched off a spending spree that boosted outlays by $14 billion. But the revenues never reached the assumed level and his Department of Finance eventually - and very quietly - acknowledged that the administration had overstated income by a whopping $165 billion over four years."

"The additional spending, which outpaced real revenues, created what was dubbed a "structural deficit" in the annual $20 billion range ever since, covered with an array of accounting gimmicks, spending deferrals and raids on special funds and emergency reserves. A few weeks ago, the Legislature's budget advisor, Gabe Petek, projected an $18 billion deficit for the 2026-27 fiscal year, rising to $35 billion later. The draft budget that Newsom's finance director, Joe Stephenshaw, outlined this week would increase outlays by $27 billion over the current year to $321 billion, including a $248.3 billion general fund, up $20 billion."

The state now projects an additional $42.3 billion in tax revenue over the next three years, which would largely reduce a persistent budget shortfall. A prior revenue spike led to assumptions of a $97.5 billion surplus and higher spending that increased outlays by $14 billion. The Department of Finance later acknowledged overstating income by $165 billion over four years. That pattern of spending beyond real revenues produced a structural deficit around $20 billion annually, managed with accounting maneuvers and fund raids. Recent projections show deficits of $18 billion rising to $35 billion absent the new revenue, while the draft budget raises total outlays to $321 billion.

Read at San Jose Inside