The much-revised 2024-25 state budget that Gov. Gavin Newsom released last week contains hundreds of spending reductions and other actions to close what he says is a $44.9 billion deficit.
Exactly two years earlier, Newsom boasted as the state enjoyed a $97.5 billion budget surplus, thanks to surging revenues from the post-pandemic economic recovery. “No other state in American history has ever experienced a surplus as large as this,” Newsom said as he unveiled a revised $300 billion 2022-23 budget, which was $14 billion higher than his original proposal.
The budget he signed a month later was even larger, $307 billion, with immense new commitments, including cash payments to poor families and expansions of health care and early childhood education. So, one must wonder, how did a $97.5 billion surplus morph into a huge deficitand a budget that is pulling back much of the new spending Newsom and the Legislature had so eagerly approved? The new budget takes a stab at answering the question, basically saying that revenues fell well short of projections.
“Due to the revenue spike from 2019-20 to 2021-22, the budget acts of 2021 and 2022 were based on forecasts that projected substantially greater revenues in the last two fiscal years than occurred,” the budget declares. However it doesn’t reveal why those erroneous projections were made in the first place. In 2022, Newsom’s budget staff evidently looked at a spike in tax revenue as the state’s economy recovered from.