Tipsheet

Newsom Humiliated By Disastrous Budget Report One Week After Bragging About California's Economy

California is facing a fiscal crisis with a record $68 billion budget deficit under the leadership of Gov. Gavin Newsom (D-CA.). 

This week, reports from the nonpartisan Legislative Analyst Office found that California must undergo significant spending cuts and dip into its reserve fund, forcing Newsom to make substantial changes for next year. 

The Associated Press details the crisis: 

Newsom and the state Legislature now must come up with a plan to cover this deficit. Newsom will present his plan in January and then negotiate with state lawmakers through June. The next budget year begins July 1. Newsom’s first term in office was buoyed by record-smashing surpluses of more than $100 billion in some years. The money allowed him and his Democratic allies in the state Legislature to greatly expand government, including paying for guaranteed health insurance for all low-income adults regardless of their immigration status and free lunches for all public school students. Now, in his second term, growing budget deficits could threaten some of Newsom’s accomplishments at a time when he is building his national profile that could lead to a run for president beyond 2024. The Legislative Analyst Office says their projections, from 2022-2023 through 2027-2028, show a cumulative deficit of $155 billion. Still, even in the face of deficits, Newsom and the state Legislature last year gave a lucrative tax break to the state’s film and television industry while also agreeing to gradually raise the minimum wage for health care workers to $25 per hour. That wage increase will cost the state about $20 billion this year in increased labor costs and Medicaid payments to hospitals. 

GOP state Sen. Roger Niello (R-CA.) warned California Democrats, saying, “Republicans cautioned that this level of spending would lead to greater deficits, and it would be more prudent to show restraint. Unfortunately, the majority party ignored those warnings.”

Reports note that financial turmoil has been further exacerbated by the impacts of severe winter storms that have blown through the state recently, causing additional economic strains. 

Currently, California has secured over $37 billion in several different savings accounts, which could play a significant role in mitigating the financial crisis.

Meanwhile, during the much-anticipated nationally televised debate with Gov. Ron DeSantis (R-FL) last week, Newsom boasted that California “has no peers,” bragging about its booming economy.

“California dominates. It’s the size of 21 state populations combined. It’s the fifth-largest economy in the world. We dominate, number one manufacturing state,” Newsom said.