We can say this much about the folks in the California Legislative Analyst’s Office: They don’t mince words. After Gov. Gavin Newsom crowed last week about “his” $76 billion surplus, the LAO was standing by with a bucket of cold water to dump on his latest proposed budget.

The Legislative Analyst’s Office is the state legislature’s nonpartisan fiscal and policy advisor, and they had plenty of advice.

First, the LAO states that Newsom’s $76 billion figure is about double what the surplus actually is: “We estimate the state has $38 billion in discretionary state funds to allocate in the 2021 22 budget process, an estimate that is different than the governor’s figure.” The LAO attributes the difference to the fact that most of the $76 billion must be spent on specific purposes including schools and community colleges, reserves, and debt payments. Spending which is constitutionally mandated cannot be considered “surplus.”

Second, the Gann Spending Limit, a constitutional provision requiring surplus funds to be returned to taxpayers, complicates the governor’s plan to provide direct payments to only some of California’s residents. A way to avoid the problem would be to return money directly to taxpayers by reducing taxes, something the LAO has acknowledged is a viable alternative.

Here again, the LAO pushes back against the governor’s assumptions: “The Governor’s May Revision estimates the state will collect $16 billion in revenues in excess of the [Gann] limit this year. However, the ultimate amount of a potential excess will depend on decisions by the Legislature. Ultimately while the [Gann limit] will be an important consideration in this year’s budget process, the Legislature has substantial discretion in how to meet the constitutional requirements.”

Third, and perhaps the most offensive to the taxpaying public, is the governor’s intention to continue drawing down the state’s reserve funds. This makes no sense when we have a multi-billion dollars surplus. The LAO expressly states that such a plan is imprudent: “Despite a historic surge in revenues, the Governor continues to rely on budget tools from last year. Specifically, he uses $12 billion in reserve withdrawals and borrowing to increase spending… We urge the Legislature not to take a step back from its track record of prudent budget management.”

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