California lawmakers are scrambling to figure out how to deal with the state’s massive budget deficit. Regardless of how successful budget gimmicks and other tricks are in making the budget hole look less deep, cuts will needed. Alas, politicians are also taking the time to ponder tax increases.
Everyone knows the state is facing a budget gap. The nonpartisan Legislative Analyst’s Office thinks the state budget deficit is as much as $73 billion, while Gov. Gavin Newsom has put the number at half that, around $38 billion.
As CalMatters columnist Dan Walters noted in a recent column, state lawmakers have already tried their hand at moving money around, including a package of “solutions” which “consist largely of temporarily suspending some of the appropriations in the 2023-24 budget that was adopted last June, shifting some spending from the general fund into special funds, borrowing from various pots of money and tapping into reserves.”
But that will only buy the state some time. The fundamental budget problems are still there: the state is spending far faster than it is taking money in and the state has locked itself into generous contracts with the state’s public sector unions.
Given the one-party dominance of California state government and the prominent role of public sector unions in the Democratic Party’s coalition, the Legislature will no doubt try to do everything it can to work around those fundamental problems rather than confront them head-on.
But at the end of the day, cuts need to happen.
According to a recent estimate from the LAO, salaries and salary-driven benefits for state employees alone take up $40 billion of the state budget.
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Slashing vacant positions is one relatively easy option that won’t necessarily disrupt services or departments. Interestingly, the LAO notes that the number of vacant positions has much grown faster than they can be filled. The vacancy rate was around 13% in 2015 compared to 21% as of December 2023.
But even with major cuts to vacant positions, the savings won’t be much compared to the scope of the budget problem.
Unsurprisingly, according to the California Tax Foundation, state lawmakers have considered tax and fee hikes totaling over $193 billion in the first two months of the year. These include taxes on personal assets, pet food, candy, wine, and much more.
This isn’t necessarily unlike other years in California. State lawmakers are routinely pitching massive tax increases to fund some scheme or another. But in recent years legislators have been considering those tax hikes in the context of budget surpluses and so have been unable to justify passing them.
Now, with the pressure not to make too many devastating cuts, it will be interesting to see if the massive deficit prompts lawmakers to turn to taxpayers to make their jobs easier.
