Newsom New $80B Deficit: “No New Taxes,” But Free Medi-Cal for Illegal Aliens
Gov. Gavin Newsom facing an -$80 billion deficit this year and at least -$80 billion for the next two years, announced a revised budget plan that will cut $15.2 billion each of the next two years, but will provide free Medi-Cal coverage to all illegal aliens at a cost of $5,000 per resident.
Gov. Newsom a year ago with 54% favorability to 41% unfavorable in state polls was being whispered as Biden’s replacement as Democrat presidential candidate. But 365 days later and Newsom’s unfavorability is now over 50% and his latest odds for becoming the next President of the United States have collapsed to just 3.6%.
At this time last year, Newsom passed a $454.7 billion budget with a projected -$14 billion deficit for FY 2023-24 that began on July 1. But with five revised budgets in the last year, the non-partisan Legislative Analyst Office (LAO) predicts an $80 billion deficit this fiscal year ending June 30, and over $30 billion annual deficits for the next 4 years.
The LAO Monthly Tax Collections Falling Short of Governor’s Budget. Through April, income tax collections have fallen about -$3.5 billion short of Governor’s Budget projections. Similarly, corporation tax collections are down almost -$2 billion. Sales tax collections are down about -$1 billion through the end of March.
The LAO warned last week:
“Revenues Likely to Fall Below Governor’s Budget Assumptions. Our forecast continues to suggest there is significant downside risk to state revenues relative to the Governor’s Budget. Specifically, our forecast is $19 billion below the Governor’s Budget across the 2022-23 to 2024-25 budget window. That being said, there is still significant uncertainty about how much revenue the state ultimately will collect. It is entirely possible that revenues could end up $8 billion higher or lower than our estimate for 2023-24 and $20 billion higher or lower for 2024-25.”
Furthermore, California corporate tax revenues are down over 15 percent from last year—the fourth-largest year-over-year drop in collections in the last four decades; and California core sales tax revenues (a seasonally adjusted measure that omits fuel and certain online sales) plunged by 4 percent—the fifth-largest quarterly decline in the last four decades.
Despite Newsom’s economic “Basket of Deplorables,” he intends to continue funding the estimated 700,000 undocumented workers that beginning Jan. 1, 2024 began for the first time providing Medi-Cal health insurance to all age groups at an average cost of $5,000 per person.
Gov. Newsom as he races toward a California Constitutional deadline to file his FY 2024-2025 budget for the year beginning July 1 is admitting the current year budget deficit has expanded to about -$75 billion and a -$44.9 billion deficit for the coming year.
President and former California Governor Ronald Reagan’s 1980s across-the-board tax cuts kicked off the technology venture capital boom centered in California. California personal income over the next last four decades rose 13 times, but state spending has increased at an even faster 18 times.