In 2022, California faced a budget crisis after overestimating revenue by $165 billion, leading to significant spending on new programs. Governor Gavin Newsom boasted a $97.5 billion surplus, but the real revenues fell short, resulting in deficits and borrowing to cover the gaps. The state’s economy struggled, leading to job losses and decreased consumer spending.
The state’s budget analyst, Gabe Petek, highlighted the ongoing financial challenges, with spending continuing to outpace revenues and operating deficits persisting. This has created a political dilemma for California’s leaders, as they must now focus on reining in spending to address the structural deficit.
Assembly Speaker Robert Rivas acknowledged the need for restraint in budget decisions to prepare for future challenges. As Newsom prepares to propose a new budget for 2025-26, the legacy of the massive miscalculation in 2022 looms large.
CalMatters, a nonprofit newsroom, provides critical coverage of statewide issues, holding leaders accountable and informing Californians. The state’s financial struggles serve as a reminder of the importance of responsible fiscal management and the long-term impact of budget decisions.
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