[Noozhawk’s note: We republish news articles and commentaries from CalMatters on state and local policy issues that affect Santa Barbara County readers.]
The state Assembly’s Democratic leadership published a remarkable bit of political fiction last week, a “budget road map” that essentially blames President Donald Trump for California’s multibillion-dollar deficits.
The document declares that “state revenues are surging,” which may be true, but then continues: “Yet the fiscal picture ahead is anything but easy. Because of the Trump administration’s failed policies, healthcare costs are climbing. Republicans in Washington are ripping away federal funding. And a White House that’s lurching — from unprecedented foreign policy miscalculations to reckless tariffs — makes an already difficult job balancing the budget significantly more challenging.”
Nowhere does the document acknowledge that California has a “structural deficit” that has plagued the budget for four years, ever since Gov. Gavin Newsom declared in 2022 that the state had a $97.5 billion surplus based on what his administration later acknowledged to be a $165 billion, four-year error in forecasting revenues.
It had assumed that a one-time surge in revenues would be permanent.
The Legislature embraced the revenue estimate and the surplus declaration without question and sharply increased spending.
When the assumed revenues didn’t materialize, legislators were left with obligations that outstripped real revenues by $20 billion or more each year.
The gaps, $125 billion so far, have been papered over with a variety of what officials called “solutions,” most of which solved nothing other than postponing the day of fiscal reckoning.
They included off-the-books loans, spending deferrals and accounting gimmicks.
Newsom has pledged to finally balance the state’s books in his revised 2026-2027 budget that will be unveiled this week and to not leave the chronic deficit for his successor.
But how he would do that without raising taxes remains a mystery.
The state Senate leadership’s budget outline embraces tax increases of some kind, probably on corporations, while the Assembly’s version says, “Fixing the long-term budget will take a combination of cost controls and new revenue.”
While Trump’s name is invoked repeatedly in the Assembly’s “budget road map” as a major factor in the state’s budget dilemma, not only does the problem predate Trump by several years but the reductions in federal aid, mostly affecting healthcare, don’t impose any legal obligation on the state to fill in the gaps.
Moreover, Newsom and the Legislature have made their own healthcare reductions.
One of the biggest items in that 2022 spending surge after Newsom’s wrongheaded surplus declaration was the extension of Medi-Cal health care coverage to all adult undocumented immigrants.
The coverage took effect in 2024 but in 2025, officials said it was costing $6.2 billion more than expected, so enrollment was frozen.
Backfilling today’s federal reductions would be costly, and healthcare advocates are ramping up pressure on Capitol politicians to do it, but the underlying structural deficit is a far bigger nut to crack.
Revenues are running higher than projected in the current fiscal year.
The Legislature’s budget analyst, Gabe Petek, has upgraded estimates of revenue from sales taxes and personal and corporate income taxes by $25 billion over two years but adds, “we continue to caution that these surging revenues likely are not sustainable. This suggests it would be prudent to approach the state budget as if we are at or near a revenue peak.”
Petek’s office also notes that about half of any revenue surge would automatically go to schools, so the impact on the larger budget deficit would be marginal.
The danger is that the Capitol’s politicians may not only blame Trump for the problem they created four years ago, but they’ll seize on the revenue surge as a painless cure — in other words repeating what got them in trouble in the first place.
This commentary was originally published on CalMatters and is reposted with permission. Click here to sign up for CalMatters newsletters.
