Patterico's Pontifications

1/11/2024

Another Budget Fiasco in the Golden State

Filed under: General — JVW @ 6:55 am



[guest post by JVW]

The incomparable Dan Walters, the dean of Sacramento reporters who has been covering the scene at the state capital for over 60 years now, reports that our mono-party government is once again playing fast and loose with the budget. And it’s really revolting what they plan to bamboozle the taxpayer with:

There’s an old adage that one must first acknowledge a problem exists before it can be addressed. It bears repeating because of a huge disagreement over the size of California’s state budget deficit.

In December, the Legislature’s independent budget analyst said the state faces a $68 billion deficit, mostly due to revenue shortfalls in the 2022-23 and 2023-24 budgets, and projections into 2024-25.

On Wednesday, Gov. Gavin Newsom introduced a 2024-25 budget that assumes a $37.9 billion deficit, while chiding news media for repeating analyst Gabe Petek’s projection, saying they are undermining confidence in the state’s economic resilience.

Were Petek’s figure valid, the state would have to make huge adjustments in spending and perhaps entertain tax increases to balance the budget.

Newsom’s much lower number, however, allows him to cover it with an array of budgetary gimmicks often used in the past, such as borrowing money from special funds, tapping reserves and delaying some budgeted expenditures.

The difference between Greasy Gavin’s numbers and those from the budget analyst is about half due to discrepancies in revenue projections, and half due to discrepancies in estimated spending obligations. It will come as no surprise that the gelatinous governor’s projections are self-servingly bullish, and probably unrealistic. Dan Walters explains:

Estimating income and outgo as many as 18 months into the future is not an exact science, and California has a sorry history of making huge errors in its budgets, largely because the state has a very lopsided dependence on taxing the state’s wealthiest residents. Their incomes, especially earnings on investments, tend to make wide swings from year to year. It’s called “volatility” and Newsom cites it as the chief factor in forecasting revenues.

Jerry Brown warned the state for years that counting on the California’s wealthiest residents to keep the budget in alignment is a recipe for disaster, but cowardly and craven Democrats (Republicans have had zero say on budgetary matters for the past 12 years) refuse to back away from the Marxist ideal of “from each according to his ability, to each according to his need,” which thus places us on the revenue roller-coaster. And while flaky old Governor Moonbeam issued stern warnings out of one side of his mouth, the other side of his mouth was heralding increases in state spending which have now reached unsustainable levels, setting a pattern that his successor has been happy to continue. Happy-talk forecasts of high-yields in tax revenue are tossed about, and, more often than not, baked into the final budget cobbled together by the legislature and governor. Last year’s official state budget estimated that the final six months of 2023 would see the state take in $123.3 billion in revenue; the actual number according to the controller turned out to be $93.3 billion. See how easy it is for the Golden State budget to get out of whack?

Dan Walters points out that throughout his long history covering California the budget analyst’s office has traditionally come up with much more accurate estimates than the governor’s office has, irrespective of which party happened to be occupying the corner office in Sacramento. So it goes without saying that their forecasted $68 billion deficit looming in 2024-25 is probably closer to the mark than anything that will emerge from Team Gavin. A deficit of that magnitude can’t be papered over with the usual tricks such as delayed payments, questionable account transfers, and raiding the state’s vaunted rainy-day fund. It will instead require some unpalatable bromide of tax increases and spending cuts designed to enrage all constituencies and interest groups. And if the rich keep fleeing the state for lower-tax domiciles, this is all only going to get worse.

Those of you who were in California in the early part of this millennium (and those of you outside of the state who were interested in our goings-on) may recall that former governor Gray Davis found himself in the same situation right around this time of year twenty-two winters ago. He too chose to run with a ridiculously lowball estimate of the looming deficit in order to avoid having to seek reelection mere months after having raised taxes and cut services. When, as everyone foresaw, actual state expenditures dwarfed revenue by a sum far more considerable than the Davis Administration had estimated, the newly reelected governor immediately announced an increase in the vehicle tax paid by all California auto owners to help plug the hole. This was the opening salvo which led to Gray Davis’s recall just ten months later. Gavin Newsom will deserve the same fate for playing the same stupid games.

– JVW

30 Responses to “Another Budget Fiasco in the Golden State”

  1. This is exactly why I have no interest in a Balanced Budget Amendment — California has just such a requirement and yet they just pretend to balance it. Eventually it catches up with them and either there is a huge tax increase or they get lucky. Last time they got lucky was with COVID, although not everyone had the same luck.

    What is needed is a spending limit, tied to PAST years’ economic performance. At a national level, limiting spending to, say, 25% of the average GDP in years -2 through -4 would do nicely, and would tend to balance the business cycle somewhat.

    At a state level this might also work, although federal revenue sharing and grant money makes it more awkward.

    Kevin M (ed969f)

  2. One of the long-term tax increase tricks the Dems use is to jack up the top income bracket on the rich high current incomes, earmarking the money to some cause that the state already spends a lot on, money that is then usable for other activities.

    Kevin M (ed969f)

  3. Kill the train dead. Die train, die.

    Kevin M (ed969f)

  4. Gavin Newsom will deserve the same fate for playing the same stupid games.

    But, as we saw with the last recall, California Republicans are not above playing even stupider games and turning the recall into a fringe-issue soapbox.

    Kevin M (ed969f)

  5. The governor’s plan seeks to maintain funding for many of his expensive policy promises, including the expansion of Medi-Cal eligibility to all immigrants regardless of legal status.

    https://www.latimes.com/california/story/2024-01-10/california-gavin-newsom-budget-2024-deficit

    Kevin M (ed969f)

  6. …limiting spending to, say, 25% of the average GDP in years -2 through -4 would do nicely, and would tend to balance the business cycle somewhat.
    At a state level this might also work, although federal revenue sharing and grant money makes it more awkward. Kevin M (ed969f) — 1/11/2024 @ 7:49 am

    A word to the wise: Go for it, but realize that they never give up.

    In 1992, Colorado voters added the TABOR amendment to the state constitution. TABOR has enabled the state to grow its economy in a fiscally healthy and responsible manner (as with Goldilocks, neither too fast nor too slowly, but just right.)
    The Democrats have hated TABOR for over 30 years now. In their desperation to spend more and more and more, they’ve created work-around revenue legislation, labeling items as a “fee” instead of a “tax,” as fees are TABOR-exempt. They’ve chafed under the spending portion that restricts annual budget increases to the inflation rate plus population increase: any resulting revenue surplus must be returned to Colorado taxpayers.

    Now holding both the governor’s office and a legislative majority, they want to “steal” from the current TABOR surplus to mitigate the [truly astounding] upcoming increases in the real property tax valuations. There is a mighty policy fight going on here, right now, on the one hand,to breach, on the other hand to protect, the fiscal responsibility policies mandated by TABOR.

    ColoComment (b40602)

  7. But, as we saw with the last recall, California Republicans are not above playing even stupider games and turning the recall into a fringe-issue soapbox.

    Yeah, one on the reasons that the Davis recall succeeded was because it was an authentically populist (in the best sense of the word) driven movement. Sure, Darrell Issa gave a lot of money to ensure that the signatures were gathered, but by and large the recall movement did not bear the fingerprints of the GOP, no matter how hard California Democrats tried to convince us otherwise.

    The GOP is in way worse straits these days than they were in 2002, so for a recall to work today it would absolutely have to be seen as an independent movement led by citizens.

    JVW (1ad43e)

  8. One of the long-term tax increase tricks the Dems use is to jack up the top income bracket on the rich high current incomes, earmarking the money to some cause that the state already spends a lot on, money that is then usable for other activities.

    Oh yeah, absolutely. I’ve long railed against the idea that every single tax increased proposed in this state is said to be “for the children,” or “for veterans,” or “for the homeless.” Some years ago a study from Stanford estimated that less than half of new school bond money ends up in the classroom, with most of it going to back-fill teacher pension obligations. But of course that is never spelled out explicitly by the pro-bond side.

    JVW (1ad43e)

  9. But of course that is never spelled out explicitly by the pro-bond side.

    It is typically denied, with a lot of blather about how oversight will prevent this.

    Kevin M (ed969f)

  10. JVW (1ad43e) — 1/11/2024 @ 9:54 am

    Having a celebrity candidate didn’t hurt.

    Rip Murdock (d2a2a8)

  11. California tries to help poor people. Red states save money by dealing with social problems thru law enforcement after all police bullets don’t cost that much. In mississippi state has taken over courts in jackson because legislature thinks they weren’t sending enough black people to jail to serve in their privatized slave labor camps.

    asset (a7e0d3)

  12. (axios) the wealthiest 10% own 93% of stocks. Also the top 20% own 90% of wealth and the top 1% own as much wealth as the bottom 90% In red states most don’t have minimum wage in the south where fed. minimum wage is 7.25 an hour. How many here would like to feed and house your family on 7.25 an hour?

    asset (a7e0d3)

  13. asset (a7e0d3) — 1/11/2024 @ 1:51 pm

    How many here would like to feed and house your family on 7.25 an hour?

    That’s not who takes those jobs?

    How many people accept pay for zero dollars and hour or less than zero? (volunteer work, job training or education?)

    Sammy Finkelman (1d215a)

  14. Start here:

    1. We admitted we were powerless over debt—that our lives had become unmanageable.

    Kevin M (ed969f)

  15. How many here would like to feed and house your family on 7.25 an hour?

    How many would like to have done something with their lives so that they were worth more to someone else? If you are trying to feed a family on minimum wage you have effed up in a major way. SOohas your spouse.

    But it could be worse. You could be trying to do it at $0.00/hr, which is what happens to people who used to be making $7.25 when the minimum wage got raised to $15/hr and their employer sought more competent workers, or automated. Not a lot of parking attendant jobs left.

    Kevin M (ed969f)

  16. the wealthiest 10% own 93% of stocks.

    Isn’t this a bit self-referencing. Do you expect that the poorest 10% own 93% of stocks?

    Rich people invest. It’s a thing. Would you rather that the rich people didn’t invest and instead lit cigars with the money?

    Kevin M (ed969f)

  17. I have trouble believing asset is as terminally stupid as his comments make him appear.

    Kevin M (ed969f)

  18. (axios) the wealthiest 10% own 93% of stocks. Also the top 20% own 90% of wealth and the top 1% own as much wealth as the bottom 90%

    If asset wants us to take these allegations seriously, asset needs to learn how to embed a link to the supporting evidence inside of the comment. I searched on Axios for this contention about the top 1% owning as much wealth as the bottom 90%. It doesn’t exist; it’s a figment of asset’s hyperactive Marxist imagination. On Monday asset was claiming that “the top 1% own 50% of the wealth in this country. The top 20% own 90% of the wealth [. . .]” I easily debunked that nonsense with an actual source. They show that the top 20% owns about 70% of the total wealth, and the top 1% holds somewhere between 35-40%.

    I’m getting a bit tired of your act here, asset. I’m all for having left-wing commenters here to debate with us, and I have enjoyed the back-and-forth with many of them over the past many years I have been active at this blog. But I have zero patience for someone coming here and just spewing made-up data that is very easily disproved. I am the most lenient and tolerant blogger here; I have only ever banned commenters for being abusive and I have never yet put a commenter in moderation for debating in bad faith. But consider yourself warned. If you want to cite statistics that are part of the progressive catechism, you need to give us actual links to where the claims are coming from and they had better be supported by real data. Otherwise, your commenting privileges here will be suspended until you clean up your act.

    JVW (1ad43e)

  19. asset is no more inaccurate than Ron DeSantis was last night.

    Kevin M (ed969f)

  20. As I’ve said before, California is an ongoing experiment to see how much people will put up with in exchange for a nice climate and a coastline. I put up with it until 2009, then sought refuge in Reno. No, I don’t like the winters here, but my dislike is insufficient to make me move back.

    Thank goodness for our 50 laboratories of democracy.

    norcal (f2b32b)

  21. @13 you forgot to say how they buy food if they work for free? They are getting money to buy food from somewhere.

    asset (f9aa99)

  22. @18 amp.axios (I read it on DU) also yahoo finance. top 10% own 93% of stocks. Axios was on stocks. wealth was from other sources. You didn’t mention stocks was accurate. For wealth economics.printon.edu
    The top 1% have as much wealth as the bottom 90% CBS news market watch. 9/29/2022

    asset (f9aa99)

  23. wealth of top 20% went from 86% to 88% wikipedia google top 20% own 90% of wealth. Other places say 80% and us tats .org says 71% washington post 12/6 2017 says 90% Brookings.edu says 77% 6/25/2019 so sources very I read the 20/90%.

    asset (f9aa99)

  24. Kevin M (ed969f) — 1/11/2024 @ 4:55 pm

    Doesn’t help your case. Their “fact checkers” kept whining that DeSantis’s remarks need context because DeSantis’s remarks were correct

    Sad that you resort to using leftists to attack DeSantis and then don’t even read what they wrote.

    NJRob (eb56c3)

  25. I read it on DU

    The Left’s version of Gateway Pundit.

    Kevin M (ed969f)

  26. DeSantis’s remarks need context because DeSantis’s remarks were correct

    They were, at best, half-truths, like the thing about the gas tax.

    Haley said “OK, we can increase the gas tax if we lower income taxes a lot more”

    DeSantis said “Haley advocated raising gas taxes”

    This is the kind of lie that gets me never wanting to see DeSantis in any kind of power over me.

    Kevin M (ed969f)

  27. Sad that you resort to using leftists to attack DeSantis and then don’t even read what they wrote.

    NJRob, your idea of “Leftist” is anyone to the left of Mitt Romney (and maybe even Mitt Romney) so I take your comment with a ton of salt.

    Kevin M (ed969f)

  28. Kevin,

    that you are trying to claim CNN isn’t leftist says it all. It suits your current position so you ignore it.

    NJRob (eb56c3)

  29. wealth of top 20% went from 86% to 88% wikipedia google top 20% own 90% of wealth. Other places say 80% and us tats .org says 71% washington post 12/6 2017 says 90% Brookings.edu says 77% 6/25/2019 so sources very I read the 20/90%.

    I did Google “google top 20% own 90% of wealth.” The first citation is the list which I have already used to prove that the figure is more like 70%. The second citation listed is an article headlined “The top 10% own 70% of U.S. wealth.” Why do you keep trying to beat this dead horse?

    Furthermore, citations are not links, asset. Understand that unless you can direct us to the place where your data can be confirmed — and no, I’m not going to be tracking down the 12/6/17 Washington Post — then we are all going to assume that you are making things up.

    JVW (1ad43e)

  30. @29 wealth inequality in us wikipedia under statistics says 20% own 86% of wealth. I gave you the one where it says 90% wa po. That is the figure I have seen on media. I am not that internet savy I don’t know how to do links. Maybe you can sow me how.

    asset (f39390)


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