{"id":127295,"date":"2026-01-09T23:45:09","date_gmt":"2026-01-09T23:45:09","guid":{"rendered":"https:\/\/www.newsbeep.com\/us-ca\/127295\/"},"modified":"2026-01-09T23:45:09","modified_gmt":"2026-01-09T23:45:09","slug":"is-newsom-overestimating-ca-government-revenues-again","status":"publish","type":"post","link":"https:\/\/www.newsbeep.com\/us-ca\/127295\/","title":{"rendered":"Is Newsom Overestimating CA Government Revenues Again?"},"content":{"rendered":"

When Gov. Gavin Newsom declared today that the state will likely receive an extra $42.3 billion in tax revenue over the next three years, thus alleviating a stubborn budget deficit, the inimitable Yogi Berra\u2019s famous observation came to mind.<\/p>\n

\u201cIt\u2019s like d\u00e9j\u00e0 vu all over again,\u201d Berra quipped in 1961, after watching Mickey Mantle and Roger Maris, the New York Yankees\u2019 star sluggers, hit back-to-back home runs.<\/p>\n

Four years ago, as the state\u2019s economy rebounded from a pandemic-caused downturn, the state\u2019s revenues saw a brief upward spike. Someone in the administration, perhaps Newsom himself, decided that the revenue jump would be permanent<\/a> and that it meant a $97.5 billion surplus over several years.<\/p>\n

\u201cNo other state in American history has ever experienced a surplus as large as this,\u201d Newsom bragged as he unveiled a 2022-23 fiscal year budget that topped $300 billion.<\/p>\n

Newsom\u2019s declaration touched off a spending spree that boosted outlays by $14 billion. But the revenues never reached the assumed level and his Department of Finance eventually \u2014 and very quietly \u2014 acknowledged that the administration had overstated income by a whopping $165 billion over four years.<\/p>\n

The additional spending, which outpaced real revenues, created what was dubbed a \u201cstructural deficit\u201d in the annual $20 billion range ever since, covered with an array of accounting gimmicks, spending deferrals and raids on special funds and emergency reserves.<\/p>\n

A few weeks ago, the Legislature\u2019s budget advisor, Gabe Petek, projected an $18 billion deficit for the 2026-27 fiscal year, rising to $35 billion later.<\/p>\n

The draft budget<\/a> that Newsom\u2019s finance director, Joe Stephenshaw, outlined this week would increase outlays by $27 billion over the current year to $321 billion, including a $248.3 billion general fund, up $20 billion.<\/p>\n

The revenue increase projection, which Newsom mentioned in Thursday\u2019s State of the State address, would cover all but $2.9 billion of the new spending plan, Stephenshaw said.<\/p>\n

Simply put, if the budget\u2019s projected $42.3 billion revenue increase is real, Newsom can conclude his governorship \u2014\u2013 and probably segue into a presidential campaign \u2014 with the state\u2019s finances no longer plagued by deficits.<\/p>\n

Balancing the budget would also bolster Newsom\u2019s opposition to calls from the left-leaning legislators and activists in his own party for tax increases to cover the shortfall and President Donald Trump\u2019s cuts in federal health and welfare support.<\/p>\n

However, we saw the corrosive effects of overestimating revenues in 2022, so the new forecast should be viewed skeptically.<\/p>\n

Newsom hedges his bets by portraying the budget as a placeholder that covers little more than spending increases driven by law, inflation and caseload until more revenue data is received.<\/p>\n

\u201cWhile the budget is balanced in the 2026-27 fiscal year, with a discretionary reserve of $4.5 billion, it projects a deficit of roughly $22 billion in the 2027-28 fiscal year and shortfalls in the two years following,\u201d the draft declares. \u201cThe administration intends to build on this budget proposal in May with a revised plan \u2014 reflecting updated revenue and spending data \u2014 that balances the budget in both the 2026-27 and 2027-28 fiscal years with adequate budget reserves.\u201d<\/p>\n

Having been burned badly by his phantom surplus in 2022, Newsom is obviously aware that a repeat would be politically poisonous. His more cautious approach was symbolized by how the budget was presented.<\/p>\n

In years past, Newsom would personally go through the budget, almost line-by-line, in presentations that sometimes lasted three hours. This time, he dispatched Stephenshaw to face reporters and characterize the budget as a draft that will be updated in May, as Newsom and the Legislature face a June 15 constitutional deadline for enactment.<\/p>\n

Dan Walters writes commentaries for CalMatters.<\/p>\n","protected":false},"excerpt":{"rendered":"When Gov. Gavin Newsom declared today that the state will likely receive an extra $42.3 billion in tax…\n","protected":false},"author":2,"featured_media":127296,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[29],"tags":[16476,65811,7,1843,5037,88,90,89,65844],"class_list":{"0":"post-127295","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-san-jose","8":"tag-budget-deficit","9":"tag-budget-surplus","10":"tag-california","11":"tag-california-legislature","12":"tag-gov-gavin-newsom","13":"tag-san-jose","14":"tag-san-jose-headlines","15":"tag-san-jose-news","16":"tag-state-of-state"},"_links":{"self":[{"href":"https:\/\/www.newsbeep.com\/us-ca\/wp-json\/wp\/v2\/posts\/127295","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.newsbeep.com\/us-ca\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.newsbeep.com\/us-ca\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/us-ca\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/us-ca\/wp-json\/wp\/v2\/comments?post=127295"}],"version-history":[{"count":0,"href":"https:\/\/www.newsbeep.com\/us-ca\/wp-json\/wp\/v2\/posts\/127295\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/us-ca\/wp-json\/wp\/v2\/media\/127296"}],"wp:attachment":[{"href":"https:\/\/www.newsbeep.com\/us-ca\/wp-json\/wp\/v2\/media?parent=127295"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.newsbeep.com\/us-ca\/wp-json\/wp\/v2\/categories?post=127295"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.newsbeep.com\/us-ca\/wp-json\/wp\/v2\/tags?post=127295"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}