Seven Warning Signs Hidden Inside Newsom’s May Budget Revision
California’s own Legislative Analyst says the state is structurally overextended even during an AI-fueled revenue boom.
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🕐 4-minute read
California Is Running Deficits During A Revenue Boom
California is not broke because revenues collapsed. That would be bad enough. California’s problem is worse: revenues are booming, and Sacramento still cannot make the math work. That is the warning buried inside the Legislative Analyst’s review of Governor Gavin Newsom’s May Revision. The state’s nonpartisan fiscal referee is warning that California has built a government it cannot afford — even during an extraordinary tax windfall.
The Legislative Analyst notes that current-year tax revenues are up more than 30 percent from three years ago. Personal income tax revenue is up nearly 50 percent. This is not what a revenue drought looks like. This is what a boom looks like. Yet the state still faces an operating deficit. If California cannot bring ongoing spending into balance while revenues are surging, the issue is not temporary weakness. It is structural excess.
The rest of this column is reserved for our paid subscribers. It includes the six other warning signs the LAO has called out in Governor Newsom’s budget revision...
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Below the paywall:
The reserve move that responsible governments never make during a boom
Why the borrowing number should alarm every California taxpayer
The single market force propping up this entire budget — and why it won’t last
What a “mild” market pullback would actually do to California’s finances
The historical parallel the LAO invokes that should keep Newsom up at night
The accounting maneuver the LAO says has no justification — in their own words
Oh yes - there are cool charts, too!
