Democratic Gov. Gavin Newsom is facing criticism from his Republican colleagues after he announced the budget deficit is actually $7 billion worse than his initial projections, bringing the total shortfall to nearly $74 billion.
“The Legislative Analysts Office (LAO) had an estimate that is significantly higher,” Republican vice chair of the state budget committee Roger Niello told Fox News Digital in an interview. “The ledge analyst is impartial, and has a long history of being relatively accurate on things like this and prudent, and why the governor continues to insist on using a significantly smaller deficit and even saying that he thinks the LAO is wrong is just puzzling to me.”
“And to the extent that you underestimate your deficit, your solutions are going to shoot too low, missing the target. And the consequence of that is bigger deficits in subsequent years,” he added.
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In January, Newsom estimated the shortfall to be $38 billion, even though the LAO estimated it would be closer to $45 billion. Last Friday, Newsom unveiled his revised budget, projecting the same as the LAO’s billion-dollar deficit through 2024-25 and an additional $28.4 billion in 2025-26, bringing Newsom’s revision to the nonpartisan LAO’s estimate of $73.3 billion.
Newsom also announced sweeping cuts to more than 10,000 open government jobs, an 8% slash to “state operations,” and the state’s progressive climate programs are also getting the boot.
“He is eliminating positions that don’t have people in them, so it’s budgeted spending that’s not going to be spent,” Niello said. “I would put that under the category of a gimmick. But beyond that, in terms of real budget solutions, we had three or four years prior to the current budget year of tremendous and unsustainable surpluses, even by the governor’s own account.”
In 2022, Newsom signed a $301 billion budget into law and boasted a $97 billion surplus. The budget, nearly triple what it was the prior fiscal year, included billions of dollars for climate change initiatives, homelessness and education. But two years later, the deficit ballooned.
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“We have highly fluctuating revenues because of our very progressive personal income tax structure. And we go through these cycles, frankly, quite dependently,” Neillo said.
The economic slowdown, caused by the state’s highest unemployment in the nation after recent data revealed that job growth in the Golden State was much lower in 2023 than previously believed, is largely to blame for the shortfall. The exodus of businesses and residents from the state for more tax-friendly states is also a contributing factor. California relies heavily on income taxes for its revenue.
Vince Fong, a Republican vice chair on the state’s assembly budget committee, said on X that “under Gov. Newsom, California went from a $98 billion surplus to declaring a ‘fiscal emergency’ with massive deficits in a few short years.”
“That pretty much defines fiscal mismanagement,” Fong said.
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California saw its first-ever population decline in 2020, when the state imposed rigid lockdowns during the COVID-19 pandemic. From January 2020 to July 2022, the state lost well over half a million people, with the number of residents leaving surpassing those moving in by almost 700,000.
Meanwhile, Newsom said Friday that “this is just a reminder of the totality of challenges in the past on the basis of the volatility of our tax structure, the benefits of a progressive tax system during good years, the challenges during years when things are contracting.”
