{"id":176,"date":"2026-05-22T10:47:28","date_gmt":"2026-05-22T10:47:28","guid":{"rendered":"https:\/\/nextcitydigest.com\/?p=176"},"modified":"2026-05-22T10:47:28","modified_gmt":"2026-05-22T10:47:28","slug":"walters-gavin-newsoms-last-budget-still-would-leave-californias-finances-wobbly","status":"publish","type":"post","link":"https:\/\/nextcitydigest.com\/?p=176","title":{"rendered":"Walters: Gavin Newsom\u2019s last budget still would leave California\u2019s finances wobbly"},"content":{"rendered":"
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Last week Gov. Gavin Newsom proposed a revised version of his eighth and final state budget, which he said would not only be balanced for the 2026-27 fiscal year but also for his successor\u2019s first year.<\/p>\n

Read more Horoscopes May 22, 2026: Naomi Campbell, you\u2019ll surpass your expectations<\/a><\/p>\n

\u201cI\u2019m not trying to get out of Dodge,\u201d Newsom said. \u201cThis is a balanced budget structurally for the next 18 months after I\u2019m gone.\u201d<\/p>\n

On Monday, the Legislature\u2019s budget analyst, Gabe Petek, said Newsom accomplished that with the use of one-time resources, such as reserves, and other budgetary maneuvers that will\u00a0continue the \u201cstructural deficit\u201d that has plagued the state for the last four years.<\/p>\n

\u201cA budget is\u00a0structurally balanced when revenues collected in a given fiscal year are sufficient to cover expenditures planned for that same year,\u201d\u00a0Petek\u2019s analysis\u00a0says. \u201cOn this basis, the administration\u2019s estimates show operating deficits of roughly $10\u00a0billion annually from 2026\u201127 through 2029\u201130 (and) beginning in 2027-28 these deficits represent the ongoing gap that would need to be addressed in future budgets.\u201d<\/p>\n

In other words, if Newsom\u2019s final budget is enacted, he could walk out the door next January \u2014 and presumably begin his 2028 campaign for president \u2014 while claiming to have solved the problem that he caused in 2022.<\/p>\n

However, in reality California\u2019s fiscal dilemma will continue.<\/p>\n

For those who don\u2019t recall, Newsom loudly proclaimed in 2022 that\u00a0the state had a $97.5 billion surplus\u00a0based on an expansive, multi-year revenue projection that turned out to be a mirage. The administration later acknowledged it had overestimated revenues by $165 billion, but by then Newsom and the Legislature had ramped up spending that could not be covered by real revenues.<\/p>\n

The structural deficit \u2014 an ongoing gap between income and outgo \u2014 has existed ever since, totaling $125 billion, according to Petek. While the newly revised budget would be balanced on paper, Petek is saying, the maneuvers to achieve that are temporary rather than permanent, so the underlying imbalance continues, albeit somewhat smaller than previous estimates.<\/p>\n

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Petek also notes that one way Newsom achieves short-term balance is by tapping into the state\u2019s emergency reserves, both through transfers from the current reserve funds and deferrals of mandatory deposits into those funds \u2014 thus contributing to what Petek terms \u201ca wall of debt\u201d that has been amassed during the years of deficit spending.<\/p>\n

Read more Asking Eric: I tried to set boundaries with the neighbors, and now things are awkward<\/a><\/p>\n

Reserves, under Newsom\u2019s revised budget, would shrink from $47.2 billion a year ago to $19.5 billion by June 2027.<\/p>\n

The term \u201cwall of debt\u201d harkens back to Newsom\u2019s predecessor, Jerry Brown, who used it to describe what he confronted as he began his second stint as governor in 2011. Brown cleaned up that debt and left Newsom a healthy balance sheet eight years later. Newsom wants to end his governorship on the same fiscal high note, but Petek is saying, in essence, that\u2019s an illusion.<\/p>\n

Petek suggests a series of amendments that would truly put the state\u2019s finances in order but says they would cost $24 billion in either reduced spending or increased revenues and concludes, \u201cThe state\u2019s current fiscal situation is genuinely unprecedented. Despite booming revenues, the budget position is overextended, reflecting: a\u00a0structurally higher spending base, diminished reserves, an already accumulated wall of debt, and an operating deficit.\u201d<\/p>\n

\n<\/div>\n

He also warns that \u201ca revenue shock could be coming, as the state\u2019s revenue outlook rests disproportionately on AI\u2011driven equity valuations that are trading at highs last seen at the peak of the dot\u2011com bubble.\u201d<\/p>\n

There\u2019s still another aspect to the analyst\u2019s somewhat gloomy scenario \u2014 legislators are being\u00a0besieged by demands from advocacy groups\u00a0that they reject the spending reductions in Newsom\u2019s budget, especially in healthcare, and increase outlays, even if that requires increasing taxes.<\/p>\n

It is, to use another phrase from the inimitable Jerry Brown, a \u201cyeasty situation.\u201d<\/p>\n

Read more Harriette Cole: My mom has her own story about why I\u2019m teased at school<\/a><\/p>\n

Dan Walters is a CalMatters columnist.<\/em><\/p>\n<\/div>\n<\/div>\n","protected":false},"excerpt":{"rendered":"

Estimates show operating deficits of roughly $10 billion annually from 2026\u201127 through 2029\u201130 plus an ongoing gap.<\/p>\n","protected":false},"author":1,"featured_media":175,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[8],"tags":[],"class_list":["post-176","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-opinion"],"yoast_head":"\nWalters: Gavin Newsom\u2019s last budget still would leave California\u2019s finances wobbly - Next City Digest<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/nextcitydigest.com\/?p=176\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Walters: Gavin Newsom\u2019s last budget still would leave California\u2019s finances wobbly - 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