California Budget Revision Spikes Deficit to -$45

AENN

California’s Gov. Newsom’s May Budget Revision for the 2025-26 year beginning July 1st, just revealed that deficit has spiked from -$17.3 billion to -$44.9 billion

Gov. Gavin Newsom’s $321.9 billion “Revi” Budget filed in the last hours on the last day under law, projects that based on wildly optimistic revenues and across the board spending cuts,California will still have a -$12 billion unfunded deficit next year.

The Great State of New California Has been accurately projecting these budge deficits for over 7 years.

Typical of the Newsom administration, the first 90 pages of the103-page May Revi are dedicated to spending, and only about 12 pages disclose revenue projections where Newsom admits the trade war will cause a “growth recession” that will increase state inflationary costs and negatively impact state revenues.

New California State Flag Washington DC January 6, 2021.

The Governor’s May Revi projects California revenues will fall by only -$5.2 billion in 2025-26 fiscal year, and then plunge by -$20.6 billion in each of the next three fiscal years for 2026-27 through 2028-29.

But the non-partisan California Legislative Analyst Office earlier this week, before the release of the May Revi and based on Newsom’s prior claim there would be no recession, projected revenues would fall by another -$7.8 billion in 2025-26. TheLAO also warned that in a normal recession, revenue could plunge by another -$36 billion.

The LAO highlighted that California under Newsom has racked up six consecutive years of budget deficits that were bailed out mostly due to the Biden administration’s federal transfers of $97.5 billion in COVID-19 cash and about $30 billion in extraordinary capital gains income taxes from the hot stock market over the last three years.

The LAO points out that during the same period since 2018, Newsom increased spending by over $100 billion despite a weak labor market.

California’s personal income tax collections surged over the last two years due to the stock market spiking up by almost 40%. Newsom knows that by every measure of “how expensive”stocks are remains at historically high levels, yet he continues to base his proposed budget solvency on big capital gains tax collections next year.

Gov. Newsom’s May Revi forecast reduced capital gains tax collection by 15%, or $2.8 billion. But recessions cause capital gains tax collection to crash by 80%, this explains why the non-partisan LAO forecasts up to -$36 billion revenue crash in a recession.

By mid-June under law, the California Legislature must approve,and Gov. Newsom must sign a balanced budget for the fiscal year beginning July 1, 2025.

Tomorrow, The Mountain Top Times will begin publishing a series of reports regarding the coming battle between Gov. Newsom and the California Legislature over what spending items will get slashed.