Editorial: Rolling in money but still drowning in red ink
In a revealing analysis of California’s fiscal challenges, the state is facing a staggering projected budget deficit of $18 billion for the upcoming fiscal year, which could escalate to $35 billion by 2027-28, despite a recent surge in revenue. Over the past five months, California’s treasury has seen an influx of $6 billion more than anticipated, largely fueled by the booming artificial intelligence sector in Silicon Valley. This paradox highlights a critical issue: while the state is generating substantial income, its expenditures are outpacing revenue growth, indicating a fundamental spending problem rather than a revenue shortfall. State officials, including GOP Senate Budget Committee Vice Chair Roger Niello, emphasize the need for a reassessment of the effectiveness and sustainability of programs that were established during times of surplus, suggesting that the current financial strategy is unsustainable.
Interestingly, California’s financial woes are often attributed to external factors, with state Democrats and Governor Gavin Newsom blaming the Trump administration for fiscal pressures. They argue that federal policies have shifted more financial responsibilities onto states, particularly in healthcare and housing. However, as noted by CalMatters, California’s budget issues predate Trump’s presidency, stemming from a structural reliance on income tax from high earners and capital gains tied to the volatile stock market. This dependency has created a precarious fiscal environment, where budgetary solutions have increasingly relied on one-time financial fixes rather than sustainable reforms. As the state grapples with these challenges, proposals from leftist special interest groups to implement a “wealth tax” on billionaires have emerged, which critics warn could further drive productive citizens out of California and hinder economic growth.
The situation in California serves as a cautionary tale for broader fiscal policies at both the state and federal levels. Rather than perpetually seeking new revenue sources, there is a pressing need for lawmakers to prioritize fiscal responsibility and address spending habits. As the Golden State navigates its financial landscape, it becomes clear that without a fundamental shift in how budgets are managed, the cycle of deficit spending may continue, ultimately burdening taxpayers and stalling economic progress. The call for a more balanced approach resonates not only in California but also in the national discourse on fiscal policy, where the focus should shift from merely increasing revenue to ensuring that spending aligns with sustainable growth.
To hear many Democrats explain it, the nation has racked up $37 trillion in debt, not because Congress can’t control spending, but because the taxman doesn’t confiscate enough money from hard-working Americans, particularly those with comfortable incomes.
Perhaps they should take a look at the progressive nirvana we call California.
The Golden State should be swimming in revenue. In the past five months, Sacramento’s coffers raked in $6 billion more than projected, in large part thanks to the ongoing artificial-intelligence boom in Silicon Valley.
Yet the California budget is hemorrhaging. CalMatters reports that the state faces a deficit of $18 billion in the new fiscal year, and the red ink is projected to grow as high as $35 billion by fiscal 2027-28. All this because outlays are gobbling up the healthy revenue growth. In other words, California — like the federal government — has a spending problem.
“The state must assess the effectiveness and sustainability of the programs that were created during the surplus and make necessary corrections,” state Sen. Roger Niello, the GOP vice chair of the Senate Budget Committee, said in a statement, according to CalMatters.
State Democrats and Gov. Gavin Newsom blame President Donald Trump for their problems, of course. They cite efforts by the White House and congressional Republicans to force states to share more of the financial burden for health care and housing programs. They might have a case if California’s budget woes didn’t predate Trump’s second administration.
“Even before Trump retook office,” CalMatters reports, “California already faced a structural money problem, in part due to the state’s heavy reliance on wealthy earners’ income tax and capital gains, which rise and fall with the stock market.”
Translation: The California budget is already highly dependent on soaking the state’s wealthiest taxpayers, yet that has exacerbated the state’s problems rather than solved them. In fact, rather than control their spending addiction, Democrats in the state’s legislature have in recent years relied on various one-shot budget gimmicks to slap a Band-Aid on the oozing wound.
They were even forced to re-think plans to provide taxpayer-funded health care for those in the state illegally. The horror!
In the meantime, leftist special interests in California propose a version of the “wealth” tax on billionaires as a means of stabilizing the budget. If passed, it will be an utter failure, driving more productive citizens from the state and dragging down economic growth.
Rather than an endless obsession with more revenue, Democrats in Washington and Sacramento who believe in fiscal sanity — if there are any left — must focus on the other side of the equation.
Las Vegas Review-Journal/Tribune News Service
Editorial cartoon by Steve Kelley (Creators Syndicate)
