As the California State Legislature enters the final two weeks of getting their 2020-21 budget to Governor Gavin Newsom for his signature, there is still some confusion as to the size of the financial hole Californians are current under. Is it $18 billion or $54.4 billion? And why the large disparity in numbers?
California Governor Gavin Newsom’s State Deficit Numbers (May 7, 2020):
Gov. Newsom stated this past week that his administration was projecting a $54.3 billion deficit that will reverberate through the next few fiscal years.
Before the coronavirus pandemic, the state anticipated a $6 billion surplus and projected a $21 billion “rainy day” fund.
California Legislative Analyst’s Office State Deficit Numbers (May 8, 2020):
The LAO projects a deficit of $20 to $31 billion—the actual amount will depend on how quickly the state can reopen and the economy can begin to recover.
Why the Huge Difference in Numbers?
The budget process begins in January, when the governor provides the Legislature with his proposed budget for the upcoming fiscal year (July 1-June 30). In May, based on actual revenues coming into the state, the governor updates his January proposal with what is called the May Revise. The Legislature then debates that updated budget, makes any modifications it wants to see, and approves it by June 15. The governor then has the opportunity to line item veto as much or little as he chooses and it’s done.
The huge difference between the LAO and the governor on the size of the deficit is because Gov. Newsom has based his deficit numbers on his proposed January budget, created using pre-coronavirus revenue assumptions and containing his desired spending increases for a wide variety of programs.
The LAO’s deficit numbers are based on the spending assumed from the $208 billion budget approved and signed last June; they do not include the increased spending the governor proposed in January. The difference is that the governor is building into his deficit numbers his proposed increased spending, which has not been approved yet.
This is similar to you expecting a $10,000 pay raise this year, but instead, you only got a $1,000 raise. However, instead of telling your spouse and friends that you got a raise, you reframe it as a cut—your company cut your pay by $9,000.
An anticipated raise is an expectation, just as the governor’s January budget proposal is an expectation. Until it’s revised based on actual current revenues and approved by both houses of the Legislature, this isn’t a final budget. The governor is altering the real amount of the deficit to include—to build in—his wanted spending, crisis be damned.
Why Another Half-Truth?
First, who wouldn’t want to play hero and say they brought back California from the most devastating economic downturn the state has ever faced, an historic $54.3 billion deficit? Especially someone who reeks of national aspirations. Gov. Newsom maybe writing his resume for president, paving his path to the White House.
Second, by using the larger deficit number and threatening to have to cut education by $18 billion and potentially furlough workers, cut police and fire services and social programs, the governor and his allies are in a better position to sell the people of California on higher taxes, increased fees and greater regulations and costs.
Gov. Newsom’s tyranny of numbers seems to be about ambition, half-truths and “not letting a good crisis go to waste.”
Raul Riesgo is a commentator who has been featured on Spanish language news outlets Univision, Telemundo and Mundo Fox News discussing both political and Latino community issues. He has written a book on the development of the city of Pico Rivera, that was featured on CNN’s “Latino’s in America” series. Follow him on Twitter @rariesgo.