State of California is currently running a -26% budget deficitbecause spending exceeded revenues through the first five months of the 2024-25 fiscal year.
Gov. Newsom’s approved budget planned to spend its entire $21.1 billion of reserves over the 12 months of the fiscal year. But despite revenues coming in a big +$7 billion stronger due to the hot Trump-driven stock market generating huge capital gains, California spending is up at an even faster $11 billion.
As a result, California is being forced to borrow from federal grant programs to keep the lights turned on. The state does claim to still have $93 billion of borrowable funds after taking out $4 billion in in loans in November. But those loans must be paid back within 120 days because they are against mandated federal grant funds that must be spent.
The State of California received about $97 billion in Covid-19. This allowed the state to run a record $70 billion total deficit for 2023-2024 fiscal year that ended in June. Gov. Newsom promised this years’ $23 billion in planned deficit spending would be paid with the final tranche of federal Covid-19 funds.
The state began the 2024-2025 fiscal year with about $3.7 billion in ‘Special Fund for Economic Uncertainties’ and $17.6 billion in the ‘Budget Stabilization Account’ but the cash in both of those funds have already been drained in just five months of the year.
California is now insolvent and living off of borrowings from federal grant monies as shown below in the California Controller’s November revenue and spending report through November 30.
The vast majority of state spending increases are coming from large increases in Health and Human Services spending. The Mountain Top Times has highlighted big state welfare and healthcare cost increases as a result of California adding at least 2 million illegal aliens since 2021.
Over the next month, The Mountain Top Times will produce a series of reports on the accelerating California budget crisis.
I can't wait to see Newsom squirm, and the supersanctuary of San Diego squirm when they do not get federal funds in 2025 because of their foolish decisions. . .and have even more of a deficit. Pain teaches; if you accept it!
This behavior to “borrow from Peter to pay Paul” is ridiculous. Cutting expenses, taxes and regulations is paramount if Newsom has any hope for financial stability.