{"id":4103,"date":"2026-07-09T11:07:05","date_gmt":"2026-07-09T11:07:05","guid":{"rendered":"https:\/\/nextcitydigest.com\/?p=4103"},"modified":"2026-07-09T11:07:05","modified_gmt":"2026-07-09T11:07:05","slug":"walters-newsom-and-california-legislators-claim-the-budget-is-balanced-they-need-a-reality-check","status":"publish","type":"post","link":"https:\/\/nextcitydigest.com\/?p=4103","title":{"rendered":"Walters: Newsom and California legislators claim the budget is balanced. They need a reality check."},"content":{"rendered":"
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Accurately describing the state financial situation depends largely on a person\u2019s definitions of \u201cbalanced\u201d and \u201cdeficit.\u201d<\/p>\n

Read more Opinion: America is always a work in progress<\/a><\/p>\n

Gov. Gavin Newsom and legislative leaders\u00a0describe the 2026-27 budget\u00a0they negotiated as \u201ca balanced spending plan with zero deficit.\u201d<\/p>\n

The basis for that claim is that the totality of money they propose to spend in the fiscal year that began on July 1 would be covered by tax revenues during the year \u2014 plus transfers from emergency reserves and off-book loans, such as delaying payment of $3.9 billion in constitutionally required state aid to schools and community colleges.<\/p>\n

In reality,\u00a0the $351 billion budget\u00a0and its $251 billion general fund would spend as much as $20 billion more than the state expects to receive in revenues during the fiscal year.<\/p>\n

The difference is the true deficit, as the Legislature\u2019s nonpartisan budget analyst Gabe Petek sees it \u2014 and as common sense dictates. In his\u00a0review of the revised budget\u00a0Newsom released in May, Petek said, \u201cDespite the current revenue boom, the state now faces a structural budget imbalance \u2014 meaning ongoing revenues are insufficient to support ongoing expenditures.\u201d<\/p>\n

Newsom and legislators have been overspending revenues for the last four years, ever since he declared that\u00a0the state had a $97.5 billion surplus, basing it on what the administration later acknowledged was a $165 billion error in projecting future revenues.<\/p>\n

The false surplus sparked a sharp increase in spending that has outstripped revenues ever since. Prior to this year\u2019s budget process, Petek tabbed total overspending at $125 billion since 2022, covered by what he describes as a \u201cwall of debt.\u201d<\/p>\n

Newsom pledged that\u00a0his final budget\u00a0would not only close the chronic deficit but leave his successor \u2014 presumably Xavier Becerra \u2014 with a healthy fiscal situation. Not only did the budget not close the ongoing deficit, but Jason Sisney, the Assembly\u2019s budget advisor, projects an operating deficit continuing through the next governor\u2019s first four-year term, although reduced by 2029-30 to $8.4 billion.<\/p>\n

Read more Horoscopes July 9, 2026: Tom Hanks, step outside your comfort zone<\/a><\/p>\n

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If that occurs, it means that the \u201cwall of debt\u201d could easily soar beyond $150 billion by then.<\/p>\n

Petek has repeatedly warned Newsom and legislative leaders that years of deficit spending make California ill-equipped to cope with a revenue downturn because it is inordinately dependent on taxing the incomes of the state\u2019s highest income residents, particularly on the fruits of their investments in the stock market and other assets.<\/p>\n

\u201cPeriods of elevated revenues, such as the current cycle of strong personal income tax receipts, are typically when the state should be strengthening its fiscal position,\u201d Petek said in his May review of Newsom\u2019s budget. \u201cInstead, the May revision draws it\u00a0down \u2014 relying on roughly $20\u00a0billion in reserve withdrawals and suspended deposits, as well as $4\u00a0billion in borrowing (on top tens of billions of dollars of existing borrowing), to achieve budget balance.<\/p>\n

\u201cThese actions should be reserved for addressing revenue shortfalls in downturns, not to balance the budget during a revenue boom.\u201d<\/p>\n

\n<\/div>\n

Unfortunately, Newsom and legislative leaders ignored that advice in fashioning the final budget \u2014 one that increases spending over the May budget by another $5 billion, restoring many of the reductions in healthcare and social programs that Newsom\u2019s budget contained.<\/p>\n

The budget represents a double dereliction of duty by the state\u2019s political leadership. It both continues the practice of overspending revenues and covering it with more debt. It debases the language by claiming to have balanced a very imbalanced budget.<\/p>\n

Sadly, too, much of the state\u2019s political media has tended to parrot politicians\u2019 false claims rather than adopt Petek\u2019s far more realistic view of the state\u2019s very imbalanced finances, and in doing so have been complicit in the deception.<\/p>\n

Read more Asking Eric: He\u2019ll give his grandkid $10,000 but won\u2019t use their new name<\/a><\/p>\n

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

California officials boast a finalized spending plan, yet nonpartisan analysts warn of a massive ongoing shortfall<\/p>\n","protected":false},"author":1,"featured_media":3692,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[8],"tags":[],"class_list":["post-4103","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-opinion"],"yoast_head":"\nWalters: Newsom and California legislators claim the budget is balanced. 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