"Gov. Gavin Newsom's recently proposed 2026-27 state budget included a pleasant surprise: a deficit of about $3 billion significantly less than analysts had estimated. But when it comes to California state budgets, good news rarely lasts. Newsom's own estimates warn that the deficit may reach $22 billion in the following fiscal year. It is all too common for California's budget to careen from year to year. Between 2022 and 2024 the state experienced a $175 billion swing from surplus to deficit."
"Although California's leaders deserve their fair share of the blame for putting the state on this budgetary roller coaster, there are three underlying factors that make effective fiscal management in the state uniquely challenging: an overreliance on the state's personal income tax; mandatory spending commitments that limit policymakers' discretion to address challenges; and a lack of accountability for the taxpayer money that is spent."
Gov. Gavin Newsom's proposed 2026-27 budget shows a roughly $3 billion deficit but projects a possible $22 billion deficit the following year. California's budget has swung dramatically, including a $175 billion move from surplus to deficit between 2022 and 2024. The recent crunch followed unsustainable post-pandemic spending when revenue later dropped. Three structural factors increase fiscal management difficulty: heavy dependence on personal income tax, large mandatory spending commitments that constrain policymakers, and weak accountability for how taxpayer dollars are spent. Personal income tax made nearly 70% of general fund revenue in 2025-26, amplifying volatility.
Read at www.mercurynews.com
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