California Gov. Gavin Newsom (D) has turned to climate change to explain how the state went from a $100 billion surplus two years ago to a $28 billion deficit, which would have been even higher prior to drastic actions last month.
As CalMatters noted, deficit estimates ranged from $38 billion to $73 billion:
That prompted Newsom and the Legislature to take “early action” last month to reduce the deficit by more than $17 billion ahead of the regular budget process. Their plan included some program cuts, but mostly relied on new revenue, internal borrowing and funding delays and shifts for savings, earning criticism from Republican lawmakers for being “gimmicky” and “balanced on hopes and prayers.”
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Why does California have such a financial problem? The reasons go back two years. A downturn in the stock market in 2022 hit capital gains, while high inflation pinched the housing market and the tech industry pulled back on initial public offerings as investments dropped. Those blows have continued as wealthy taxpayers carried forward their losses.
But the drops in revenue were not fully reflected in the spending plan that Newsom and legislators adopted last summer. Severe winter storms prompted the federal government to delay the income tax filing deadline for most Californians from April until November, and the state followed suit, giving an incomplete picture during the budget process. The state committed to funding programs that it subsequently realized it cannot afford.
Newsom noted the severe storms in answering a question from a reporter at a press conference on Friday:
Q: Can we explain to Californians how we move from a hundred billion dollar surppus to such a significant deficit in just a matter of a few years?
Newsom: Well it’s — yeah. Let me can explain it $349 billion of unprecedented capital gains — 11.6%, when traditional capital gains is around 5.18%, on average. It’s almost double. So you have massive volatility. You have requirements under Prop 2; the Gann [see here]; you have requirements under Prop 98 which require that set-aside we use 93% of our surplus, which is — I want to be careful — either on the higher end or without precedent for one-time purposes. So we anticipated — because we didn’t want that surplus to go to ongoing commitments — we anticipated that shortfall What we didn’t anticipate is these rain bombs in December, January, February, and March, these atmospheric rivers that led to a federal declaration that led to FEMA and the IRS moving in a direction where we couldn’t collect our taxes until, I believe November 16th, as opposed to April 15th. And so therein lied this blackout period that beguiled all of us the LAO, finance, economists, experts — and interestingly, I mean there been at the White House recently, [it] had an impact in terms of the IRS collections as well with their estimates because there were other states that had similar delays in their taxes related to weather events. If there was any indication that climate change has impacts well beyond those that are often promoted, I would consider our financial delays as just another example of why we need to tackle them, another reason I’m looking forward to conversations that we’ll be having next week in this space.
Newsom will be traveling to Rome next week to deliver a speech at the Vatican on climate change. International jet travel is considered a significant contributor to carbon emissions, but Newsom is traveling abroad regardless.
Scientists have not established a link between climate change and the storms the state experienced last winter.
Notably, Newsom was out of the country during the worst of the snowstorms, enjoying a vacation in Mexico.
Joel B. Pollak is Senior Editor-at-Large at Breitbart News and the host of Breitbart News Sunday on Sirius XM Patriot on Sunday evenings from 7 p.m. to 10 p.m. ET (4 p.m. to 7 p.m. PT). He is the author of the recent e-book, “The Zionist Conspiracy (and how to join it),” now available on Audible. He is also the author of the e-book, Neither Free nor Fair: The 2020 U.S. Presidential Election. He is a winner of the 2018 Robert Novak Journalism Alumni Fellowship. Follow him on Twitter at @joelpollak.
