As the June 15 constitutional deadline to pass a 2024-25 state budget approaches, the excellent news for Gov. Gavin Newsom is that key income tax revenue will decline barely in April exceeded the federal government's estimated figure of $16.3 billion.
Still, the bad news is that total income, sales and company tax revenues are still $6 billion below what Newsom had forecast within the January budget for the present fiscal 12 months, meaning the cumulative deficit is significantly lower can be above the 38 billion US dollars Newsom's proposed budget supposed.
But how far more?
Legislative budget analyst Gabe Petek has estimated that the Accumulated deficit for the three-year “budget window” — 2022-23, 2023-24 and 2024-25 — 73 billion US dollars, largely as a result of its more pessimistic revenue calculations. Newsom’s January budget assumes this Sales are $44 billion below last 12 months's budget forecasts over the three-year period, while Petek raises that estimate to $68 billion.
Because revenue shortfalls determine the state's deficit, whatever it might be, everyone involved within the annual budget process was closely watching what the April 15 income tax filing deadline would do.
Newsom even indefinitely postponed his annual State of the State address due to the uncertainty. Normally, governors try to handle positive themes in such speeches, and that could be particularly difficult this 12 months.
With the month's revenue figures now known, the following phase will see Newsom unveil a revised budget later this month, setting the stage for several weeks of intense – and secretive – negotiations between the governor and lawmakers. The revised budget proposal and the budget resulting from the negotiations can be balanced on paper. That means projected revenue and planned spending – $291.4 billion within the January budget – will match.
However, each is not going to be balanced within the true sense, since the revenue will include not less than 12 billion US dollars from the state's emergency reserves, many billions more in loans from special funds, etc some accounting tricks.
The June 15 budget also is not going to be the ultimate spending plan for the 2024-25 fiscal 12 months, just as the present 2023-24 budget shouldn’t be what Newsom and lawmakers passed last June. They've already made billions of dollars in changes in response to stubbornly subpar revenue. attempt to get a jump concerning the chronic gap between government revenue and expenditure.
The situation is, to make use of an old-fashioned cricketing term, a fragile one for the countless stakeholders who depend on money from the budget. Even with the addition of cash from the reserves, the expenditure side of the budget have to be reduced, although the quantity and the funds from which programs are still unclear at this point.
In theory, there may be one other way Newsom and lawmakers could truly balance the budget and satisfy those clamoring for money — by raising taxes. Newsom's last two predecessors, Republican Arnold Schwarzenegger and Democrat Jerry Brown, struggled with deficits of comparable magnitude and each won legislative or voter approval of tax increases to shut their gaps.
Left-leaning lawmakers have proposed tax increases, and one might assume Newsom, who’s ideologically to the left of the 2 former governors, can be willing to embrace that solution.
However, Newsom has publicly opposed tax increasesapparently concerned that they may drive more taxpayers or high-income businesses out of the state, but perhaps also because raising taxes would also undermine his vigorous efforts increase his national political standing.
Dan Walters is a columnist at CalMatters.
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