California lawmakers consider new taxes, blame Trump for deficit

from Dan WaltersCalMatters

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The Democratic leadership of the state assembly published a remarkable political fiction last week, a “budget road map” which essentially blames President Donald Trump for California’s multibillion-dollar deficits.

The paper states that “government revenues are rising,” which may be true, but then goes on to say, “Yet the fiscal picture ahead is anything but easy. Because of the Trump administration’s failed policies, health care costs are rising. Republicans in Washington are ripping off federal funding. And a White House reeling from unprecedented foreign policy miscalculations to reckless tariffs is already doing the hard work. to balance the budget a significantly more difficult challenge.”

Nowhere in the document does it acknowledge that the state has “structural deficit“, which has been tormenting budget for four years since Gov. Gavin Newsom announced in 2022 that the state had a $97.5 billion surplus based on what the administration later acknowledged was a $165 billion, four-year error in revenue projections. The one-time revenue spike was assumed to be permanent.

The Legislature accepted the revenue projection and surplus statement without question and sharply increased spending. When the supposed revenues did not materialize, they were left with liabilities that exceeded actual revenues by $20 billion or more each year.

the gaps $125 billion so farwere plastered with a variety of what officials called “decisions,” most of which did little more than postpone the day of fiscal reckoning. These include off-record loans, deferred spending and accounting gimmicks.

Newsom has promised to finally balance the state’s books in his revised 2026-27 budget, to be unveiled this week, and not leave the chronic deficit to his successor. But how he will do that without raising taxes remains a mystery.

the state Senate Leadership Budget Outlinee includes tax increases of some kind, possibly on corporations, while the Assembly version says, “Fixing the long-term budget will require a combination of spending controls and new revenue.”

Although Trump’s name is repeatedly mentioned in the Assembly’s “budget road map” as a major factor in the state’s budget dilemma, not only does the problem predate Trump by several years, but cuts in federal aid, mostly affecting health care, impose no legal obligation on the state to fill the gaps. What’s more, Newsom and the Legislature made their own cuts to health care.

One of the biggest elements in that spending spike in 2022 after Newsom’s flawed surplus declaration was the expansion of Medi-Cal health coverage to all undocumented immigrant adults. The coverage went into effect in 2024, but in 2025, officials said it was costing $6.2 billion more than expectedso the recording was frozen.

Filling today’s federal cuts would be expensive, and health care advocates are stepping up pressure on Capitol Hill politicians to do so, but the underlying structural deficit is a much bigger nut to crack.

Revenues are higher than forecast in the current fiscal year. The Legislature’s budget analyst, Gabe Petek, has improved revenue forecasts from sales taxes and personal and corporate income taxes by $25 billion over two years, but added, “we continue to caution that these rising revenues are likely not sustainable. This suggests that we would be wise to approach the state budget as if we were at or near peak revenues.”

Petek’s office also notes that about half of each revenue spike will automatically go to schoolsso the impact on the larger budget deficit would be negligible.

The danger is that Capitol Hill politicians may not only blame Trump for the problem they created four years ago, but also seize on the revenue surge as a painless cure-all, in other words, repeating what got them into trouble in the first place.

This article was originally published on CalMatters and is republished under Creative Commons Attribution-NonCommercial-No Derivatives license.