California Gov. Gavin Newsom (D) claimed that the state would have a modest budget surplus next year — though he still planned to raid the “rainy day” emergency fund, and warned of President-elect Donald Trump’s spending cuts.
Last year, Newsom came under intense criticism after turning what had once been a $100 billion surplus — thanks, in part, to coronavirus relief money from the Biden-Harris administration — into a nearly $50 billion deficit. Now, due to rising revenues from wealthy taxpayers, Newsom says there will be a surplus. But he warned that the surplus could be in danger from Trump’s spending cuts, fueled by Elon Musk and Vivek Ramaswamy’s efforts in the “Department of Government Efficiency” (DOGE), which plans to reduce trillions in federal waste.
The San Francisco Chronicle noted:
The budget outlook Newsom describes is a major turnaround from the $47 billion deficit last year and the $32 billion shortfall the year before. Newsom and the nonpartisan Legislative Analyst’s Office, which makes budget projections for the Legislature, both attribute the improvement to stock market gains by the state’s wealthiest taxpayers and cuts in previous years.
But, Newsom cautioned, the steep cuts to federal government spending that Trump has promised could darken the bright picture he painted of California’s economy. Newsom said the incoming president could impact California’s budget depending on how his trade, tariff and immigration policies play out. That happened last time Trump was in office, Newsom said.
The Los Angeles Times reported that even though Newsom is predicting a surplus, he is still planning to take $7 billion from the state’s “rainy day” fund, which is intended for emergencies and not for years of fiscal health:
Gov. Gavin Newsom touted higher than expected tax revenues and a “modest surplus” in an unconventional preview of his $322.2 billion spending proposal for the upcoming fiscal year, but his…
