"Trump, however, had nothing to do with what state officials have described as a structural deficit, meaning that spending encased in current law outstrips revenue expectations. Rather, it stems from what officialdom later acknowledged as a $165 billion error in revenue projections in 2022 that fueled Newsom's boast of having a $97.5 billion surplus. That, in turn, resulted in a sharp increase in spending."
"When the surplus was exposed as a phantom, the state was stuck with a chronic income/outgo gap that persists. To cover it this year, Newsom and legislators tapped emergency reserves, borrowed money from the state treasury's special funds, postponed some spending and engaged in some accounting gimmickry. On Thursday, the Legislative Analyst Office pegged the budget's total borrowing on and off the books at $21 billion."
"Although this budget is less than 4 months old, the annual budgetary cycle will soon begin anew. The Legislature's budget analyst, Gabe Petek, will issue his annual overview of the state's finances in a few weeks, followed in December by the Department of Finance's finalization of parameters and Newsom's decisions on how to spend what money he assumes the state will have, and in January by the introduction of the first draft of a 2026-27"
Less than four months after Gov. Gavin Newsom signed a $321 billion 2025-26 budget blaming President Donald Trump, California confronted a structural deficit rooted in a $165 billion revenue projection error made in 2022. The phantom $97.5 billion surplus previously touted enabled a sharp increase in spending that left the state with a chronic income/outgo gap. To manage the shortfall, state leaders tapped emergency reserves, borrowed from special treasury funds, postponed spending, and used accounting measures. The Legislative Analyst Office estimated total borrowing on and off the books at $21 billion. The annual budget cycle will restart with fiscal overviews and new proposals.
Read at www.mercurynews.com
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