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Governor Gavin Newsom stood in front of cameras and crowed that California’s budget problem was solved. He said the state would have “$0 structural deficit through July 2028.” Sounds neat. But a few days later, the Legislative Analyst’s Office — the state’s nonpartisan budget watchdog — told lawmakers a very different story. The LAO said the May Revision still leaves a sizable structural gap and that the administration is papering over the problem with one‑time fixes.
Newsom’s claim vs. the LAO’s numbers
The headline from the governor’s office was tidy: no deficit, no problem. The LAO’s work was not. Their initial review of the May Revision shows the plan relies on about $20 billion of reserve withdrawals and suspended deposits plus roughly $4 billion in borrowing. After adjusting revenues to their outlook, the LAO still counts an ongoing operating shortfall — commonly reported around $16.9 billion. In plain English: the books only balance if you raid the rainy‑day fund and kick the hard choices down the road.
How the math actually works
One‑time money isn’t a lasting solution
There are two different ways to look at a budget. One is the cheerleader view: use a forecast that fits your talking points and call it balanced. The other is the watchdog view: separate ongoing spending from one‑time items and ask whether revenues can cover future costs. The LAO did the watchdog job and warned that the state’s recent revenue boom is driven by volatile sources like capital gains. That means when the market sneezes, California could catch a cold — and this budget leaves the state with a thin coat of reserves to keep it warm.
Politics, priorities, and where the money goes
Rather than face the structural problem, the May Revision still finds money for politically popular items. The plan includes large climate bond allocations and continued health‑care spending. Meanwhile, the reserves that should be rebuilt in good years are being spent instead. That’s not fiscal discipline. It’s budget theater. The governor gets a press release and a soundbite about eliminating a deficit. The LAO gets to stand up in committee and explain that real balance would require permanent spending reductions or new ongoing revenue — neither of which the administration pushed at the podium.
Bottom line: papered‑over problems rarely stay papered over
If Governor Gavin Newsom wants to run for higher office on his management record, Californians and the country should look at the fine print. A budget that depends on one‑time reserves and borrowing is a gamble on markets and optimism. The LAO did its job by pulling back the curtain. The question now is whether Sacramento will face the hard choice: fix the spending problem or keep pretending a press release is the same thing as fiscal responsibility. Voters deserve honesty, not headline theater.
