Newsom's Rose-Colored Budget
Dear John,
It was obvious to anyone paying attention that the mass exodus of people and businesses leaving California would decimate state tax revenue. But reality seems to not have set in yet for Gov. Gavin Newsom. Either that, or he’s simply not being honest about his complete mismanagement of the state.
At this week’s press conference announcing the release of his proposed 2024-2025 budget, Newsom downplayed the state’s economic woes. The governor angrily dismissed the state Legislative Analyst’s Office (LAO) projection of a $68 billion deficit, claiming the deficit is closer to a mere $38 billion. But the fact is that LAO did a fairly thorough analysis, and what it shows is that Newsom won’t be able to get away with the long list of deferrals or delayed payments he’s laid out in his proposed budget without major concessions.
Of course, state lawmakers will need to pull back on their expensive priorities, tighten their belts and make significant budget cuts, even as they play around with the idea of a wealth tax.
The governor painted his budget as a “story of correction, a story of normalization after a period of [a] tremendous amount of distortion.” He’s also blaming the multibillion-dollar drop in revenues from what he projected last June on the federal government giving Californians a filing extension on their income taxes due to last winter’s storms.
But that’s no excuse. What’s led to California’s economic downturn isn’t rocket science. Data from the U.S. Census Bureau released late last year shows that California’s higher earners are leaving the Golden State. When high earners leave the state, their personal income taxes go with them.
Of course, the reason for this exodus lies squarely at the feet of Gov. Newsom and the legislature. People are leaving California because every single economic output in the state has grown astronomically expensive — housing, health care, food, fuel, and heating our homes. Crime and homelessness have skyrocketed, while our public schools are pushing radical ideologies instead of teaching kids to read and write.
Business leaders and their employees have grown weary of paying one of the nation’s highest tax rates for little in return.
Newsom’s latest round of budget proposals continue to be based more on wishful thinking than reality. It’s almost like the governor doesn’t understand that California has a revenue problem — or maybe it has just been convenient to feign ignorance for the last six months.
When it comes to Newsom, it’s all about shell games. Much to the chagrin of his environmental backers, he’s cutting and delaying some of his signature climate initiatives — but he’s still throwing billions at environmental and other issues without addressing the real issues at hand.
Nowhere is that more clear than his education budget. Newsom is touting that his budget won’t reduce the amount of per pupil spending — $23,519 per student — while ignoring that a shocking number of schools have lost significant student population. So he’s proposing that California continue to pay the same amount to teach fewer students — without putting anything in place to hold anyone accountable for the poor school performance that is driving families out of our K-12 schools.
Plus, we won’t know what the actual school enrollment numbers are until April. It’s possible that California’s public schools will have lost more students in addition to the several hundred thousand gone from the system in the last 3 years.
And what about school districts that want to improve school facilities? School districts that want to borrow money via bond measures will have a tougher row to hoe if the state doesn’t have the money to back them up.
And while we welcome hearing Newsom talk about spending down some of the state’s longer term obligations, he didn’t go far enough. The governor continues to ignore the substantial retiree healthcare costs the Golden State is on the hook for as a massive wave of state workers prepare to retire.
Equally baffling is Newsom’s public safety proposal to address the state’s retail theft crisis. He’s willing to throw billions more at the problem, but it’s clear he’s not willing to go all the way to toss out Proposition 47 that brought us to this point. To really address California’s out-of-control crime wave, the state must reclassify significant crimes as felonies that were downgraded under Prop 47. Until Newsom and lawmakers reform Proposition 47, nothing will change. The governor’s suggestion that somehow the crime surge is due to “organized crime” ignores the fact that organized criminals are taking advantage of Prop 47.
We could go on, but you get the gist. Newsom says he may declare a budget emergency, but when asked by a reporter, the governor said he didn’t know when he would declare it and would have to talk to the legislature first. This is the same governor who has put out one emergency order after the next during his first term, so it’s a bit of a head scratcher that he’s not doing it now.
But then again, maybe he is calculating that the delay buys him time with the media. The governor got away with a lot of friendly headlines this week following his budget release (“Newsom budget relies on reserves to avoid deep cuts”; “Gavin Newsom reveals plan to fix California spending deficit”; “The Incredible Shrinking Deficit: Why Newsom’s Budget Plan Looks Relatively Rosy”).
That plays a whole lot better than “Newsom Declares Budget Emergency.”
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