Staff Reports
Governor Gavin Newsom trumpeted a “balanced” May Revision to California’s budget last week. Don’t be fooled by the press release spin. The plan only looks neat on paper because it borrows, raids reserves, and counts on wildly high tax receipts that can vanish overnight.
How Governor Newsom “Balanced” the Budget
The May Revision leans on higher revenue forecasts, but the real tricks are one-time moves. The plan uses roughly $20 billion in reserve withdrawals and suspended deposits, adds about $4 billion in new borrowing, and touts a $9.7 billion “Surplus Holding Account” while still proposing nearly $350 billion in total state spending. The administration says it cut $1.8 billion from ongoing General Fund spending, but most of the balance comes from temporary fixes, not lasting reform.
LAO: Smoke, Mirrors, and a Long-Term Problem
The nonpartisan Legislative Analyst’s Office blew the whistle. Their summary is blunt: “Despite revenue boom, budget architecture relies on $20 billion in reserves.” In plain terms, the state is turning to one-time pots of money during a rare revenue windfall — the exact opposite of what sensible budgeting calls for. The LAO warns a structural deficit remains and the state would be badly exposed if tax receipts drop or the markets wobble.
Why This Matters to Californians
Balanced budgets that rest on borrowing and reserve raids are fragile. Personal income tax receipts have surged in recent years, but they are volatile. Using those gains to pad ongoing spending instead of building a real rainy-day fund leaves schools, health care, and public safety at risk when the next downturn hits. The LAO even suggested the Legislature should instead consider making a large deposit into the Budget Stabilization Account — not emptying it.
What Should Happen Next
Lawmakers now face a choice: accept the governor’s paper-balanced plan or push for real fixes. The Legislature should listen to budget experts, refuse to turn volatile revenue into permanent spending, and stop normalizing borrowing and reserve withdrawals. Californians deserve a budget that protects the future, not a magician’s trick that kicks the problem down the road. If Sacramento wants to brag about a “balanced” budget, make it one that actually balances over the long haul.
