[Noozhawk’s note: We republish news articles and commentaries from CalMatters on state and local policy issues that affect Santa Barbara County readers.]
There was a time, not too many years ago, when drafting and enacting California’s budgets was a fairly transparent and straightforward process.
The governor and legislators would agree on what revenues the state’s tax systems were likely to produce in the coming year and then dicker over how the money would be spent.
There were disagreements, of course, particularly when Republicans had enough legislative seats to have a say in the outcome.
But in the main, the voting public would have an understanding, through news coverage, of how their tax dollars were being spent.
It’s difficult to pinpoint exactly when the process became opaque and the budget became a hodgepodge of phantom revenues, accounting gimmicks and off-the-books loans.
However, there has been a quantum leap in opacity and complexity during Gov. Gavin Newsom’s eight years in office, a consequence of having one political party so dominant that it’s completely insulated from accountability.
Newsom and legislators can — and do — spend billions of dollars more than revenues cover. They paper over the gaps with what they call “solutions,” then brag that their budgets are balanced.
The 2026-2027 budget that was enacted in June, said to be $351.7 billion (plus $188 billion in federal funds), is the latest example.
It’s so convoluted that the Legislature’s own budget adviser, Legislative Analyst Gabe Petek, and his staff of fiscal experts, are somewhat perplexed about what Newsom and legislators wrought.
Petek says as much in a new breakdown of the budget.
“In most years, we would describe the size of the budget problem (or budget surplus) the Legislature addressed (or allocated) and the mix of choices that make up that total,” he said.
“This year, neither framing fits the budget package as neatly.”
Petek goes on to describe elements of the budget that seem contradictory, such as increasing spending that overshoots historically high revenues and depending on reserves and loans to cover the outgo while also placing more money into a new “surplus holding account.”
Although the budget package includes some traditional budget solutions, “taken altogether, this makes the budget condition difficult to describe concisely,” Petek said.
To rationalize the budget’s contents, he divides his analysis into “budget choices on both sides of the ledger,” one covering the spending side and the other on how the gap between income and outgo was closed.
Petek calculates that the budget “includes about $14 billion in budget solutions” to close the gap, primarily tapping reserves and borrowing.
The loan is accomplished by withholding $3.9 billion in aid to local school systems mandated by the state Constitution, money that must be eventually paid.
However, Petek points out that that $14 billion in “solutions” is less than the $18.5 billion operating deficit Newsom’s administration estimates during the fiscal year, thus continuing the deficit spending that has marked all of Newsom’s second-term budgets.
They stem from Newsom’s 2022 declaration that California had a $97.5 surplus, due to mushrooming income tax revenues.
That led to a sharp increase in spending, but the surplus turned out to be a mirage and the Newsom administration eventually acknowledged it overestimated revenues over four years by $165 billion.
Petek’s analysis notes that California has not maintained a cumulative account of how much money it owes from five years of covering operational deficits, but his staff has calculated the “wall of debt” at $29.2 billion, including the $3.9 billion in school aid being withheld this year.
A jaundiced view of the ongoing deficits and the debt that’s been amassed to cover them might be that they are Newsom’s training to become president, given the federal governments chronic deficits and its $40 trillion national debt.
This commentary was originally published on CalMatters and is reposted with permission. Click here to sign up for CalMatters newsletters.
