While many states are deciding how to spend record budget surpluses, California lawmakers have convened in Sacramento to determine how to address a $22.5 billion budget deficit.  Coming after two years of budget surpluses, which included tens of billions in federal COVID-19 “relief” funds, the 2023-2024 budget for the fiscal year beginning on July 1, 2023, highlights the state’s financial mismanagement and the perils of unchecked and unsustainable spending.

California’s deficit comes only six months after Governor Gavin Newsom (D) projected a $97.5 billion surplus after state leaders adopted a $308 billion budget for 2022-2023 based on the state’s “core values at present.”  When lawmakers were considering how to spend 2022’s $68 billion surplus, Citizens Against Government Waste (CAGW) suggested that lawmakers in Sacramento “focus on providing relief to taxpayers and shoring up the state’s reserves.”  Spending without planning for the future, CAGW warned, risked “creating more harm to Golden State taxpayers.”  Nevertheless, the legislature, at Gov. Newsom’s urging, chose to invest in a series of new programs that may or may not be renewed based on the state’s financial condition.

The decision to fund a host of new programs came despite the state’s $1.5 trillion in unfunded liabilities.  Instead of working to pay down existing debts in 2022, California lawmakers chose to indulge Gov. Newsom’s desire to make California the most progressive state in the country. 

His commitment to “keeping our promises” and his desire “to make unprecedented investments” suggests that Gov. Newsom will try to renew these programs again in the event of a future financial windfall.  Such a practice would leave residents who use the services subject to an on again, off again system in which certain government programs fluctuate between existence and non-existence.  Consequently, millions in taxpayer funds could be poured into programs only for them to go years without funding.  Creating unsustainable programs that go away every time the state fails to run a significant budget surplus is no way to govern.

Even as lawmakers prepared 2022’s spending spree, the state’s Legislative Analyst’s Office warned that the legislature risked a deficit by 2025-2026.  That turned out to be too optimistic.  Faced with a significant deficit, state lawmakers should take this opportunity to reconsider the various unsustainable programs approved in 2022.  Instead of temporarily shelving projects until the next time the state has access to a budget surplus and mounds of federal grant money, lawmakers should adopt a constrained budget that will allow the state to operate within its means.  Instead of planning for future budget resiliency, it appears that years of poor planning has caused the deficit to come two years earlier than expected.

As was the case when Gov. Newsom chose to declare war on pork, gas-powered lawn equipment, and gas-powered cars, the Golden State is once again the gold standard for what states should not do.  While many other states have followed CAGW’s recommendations for saving and planning for the future and avoiding long-term funding of unsustainable programs, California lawmakers instead chose to pour taxpayer money into unsustainable programs with no realistic means of paying for them when federal funding dried up.  

Since they already announced their spending wish list, legislators are likely to reach into reserves or borrow from the future to follow through and fund everything they can.  That will likely drive even more Californians, regardless of their financial status, out of the state.