Tucked away in the details of the state budget, a set of charts—known only to a select few finance enthusiasts—charts California’s revenue and expenditures over the past fifty years.
A recent graph from Governor Gavin Newsom’s budget proposal for 2026-2027 underscores the rapid increase in spending during his tenure, soaring beyond modest population growth and inflation, coupled with substantial revenue hikes.
The financial implications are staggering, with projections from Newsom’s Treasury Department and the Legislative Analyst’s Office highlighting “structural defects.” This suggests that the revenue will not meet the spending commitments made by Newsom and the state legislature.
Legislative analyst Gabe Petek noted that both his office and state administration anticipate facing budget deficits ranging from $20 billion to $35 billion annually for several years ahead.
“These deficits are troublesome for a few reasons,” Petek shared. “Firstly, the state is looking at four years of anticipated deficits, accumulating $125 billion in fiscal issues so far, resulting in a chronic negative financial state.”
“Secondly, the structural deficit is widening. Our November forecast is the bleakest since the pandemic began. Lastly, these deficits persist despite economic growth and rising revenues, indicating that the issues are more systemic than just a cyclical downturn. Overall, these patterns raise significant concerns about the state’s financial viability.”
This historical data is crucial as it reinforces Petek’s warning about deficits and lessens the inclination for politicians to attribute blame to economic conditions, crises like the Los Angeles wildfires, or federal funding cuts from former President Trump.
The budgets that Newsom has signed from 2019 to 2020, alongside the latest proposal, reflected a 60% revenue increase, primarily through taxes. This was in response to a substantial 48% rise in personal income across California during this timeframe. Yet, total expenditures surged by 72%, climbing from $203 billion to $349 billion.
In contrast, California’s population has remained relatively flat at around 39.6 million. The national inflation rate sits at about 29%, averaging 3.4% annually, while California’s rate is a touch lower at roughly 3%.
This paints a picture where revenues increased at around double the inflation rate, but spending escalated at an even steeper pace.
It highlights a nearly 28% growth in state personnel—from 376,990 to 481,850—as the budget extended programs and added new categories initiated when Newsom took office. Healthcare spending, especially for lower-income individuals, alongside constitutional mandates for funding public schools, significantly fueled this growth.
There is also evidence suggesting that Newsom’s team erred in its 2022 revenue forecasts, triggering this expenditure increase.
As the state economy started to recover from COVID-19 lockdowns in 2021, General Fund revenues skyrocketed by 53% from the pre-pandemic levels of 2019, surpassing $200 billion for the first time.
For reasons that might only make sense to Newsom and his advisors, they believed this uptick in revenue would be sustainable. This was announced during the finalization of the 2022-23 budget amidst claims of a $97.5 billion surplus, with Newsom boasting of the state’s historical financial gains.
However, this assertion led to immediate increases in spending that persisted through subsequent years. Unfortunately, the anticipated revenue spike proved to be an illusion, with the government later acknowledging they had overestimated it by $165 billion over four years.
As a result, structural deficits have continued to accrue, totaling $125 billion, according to Petek. Newsom certainly seems to have aspirations for a presidential bid after his term, but the financial chaos he created could come back to haunt him.
