{"id":254,"date":"2026-05-08T07:01:29","date_gmt":"2026-05-08T07:01:29","guid":{"rendered":"https:\/\/california-relocation-journal.com\/?p=254"},"modified":"2026-05-08T07:01:29","modified_gmt":"2026-05-08T07:01:29","slug":"taxes-program-cuts-and-newsoms-legacy-on-the-line-in-budget-negotiations-6","status":"publish","type":"post","link":"https:\/\/california-relocation-journal.com\/?p=254","title":{"rendered":"Taxes, program cuts and Newsom\u2019s legacy on the line in budget negotiations"},"content":{"rendered":"<div>\n<p><span>SACRAMENTO\u00a0\u2014\u00a0<\/span>One of Gavin Newsom\u2019s top goals as he winds down his final year as California governor is to leave the state with a balanced budget.<\/p>\n<p>Read more <a href=\"https:\/\/california-relocation-journal.com\/?p=252\">Who won the California governor debate on CNN? Here\u2019s what our columnists say<\/a><\/p>\n<p>After years of the state spending more money than it brings in, it\u2019s Newsom\u2019s last opportunity to fix a chronic deficit or dump the problem on the next governor.<\/p>\n<p>How far he goes to solve the state\u2019s structural spending imbalance will define his legacy as a steward of trillions in taxpayer dollars. As a potential candidate for president in 2028, he could also have a political incentive to do as little as possible.<\/p>\n<p>\u201cAny cuts you make are going to cause people to scream,\u201d said Darry Sragow, a veteran Democratic strategist. \u201cAny increases in taxes are going to cause people to scream and in terms of what\u2019s best for a presidential run, it would be nice if people weren\u2019t screaming.\u201d<\/p>\n<p>As California\u2019s 40th governor, Newsom expanded publicly funded healthcare to income-eligible undocumented immigrants, increased state-subsidized child-care slots and provided free meals for schoolchildren among a wishlist of progressive wins since he took office in 2019. <\/p>\n<p>His achievements have helped struggling Californians live in an increasingly unaffordable state and given him bona fides to tout to voters if he launches a bid for the White House. <\/p>\n<p>But the state could never afford to pay for existing services and the new programs that Newsom and Democratic lawmakers enacted, according to an analysis of ongoing state spending since before the pandemic released by the Legislative Analyst\u2019s Office  last week. <\/p>\n<p>Spending from the state\u2019s principal operating fund has grown about $100 billion since Newsom\u2019s first full fiscal year in office in 2019-20, mostly due to the growing cost of existing programs that he inherited. State spending has outpaced California\u2019s strong revenue growth by about 10%, creating a perennial budget shortfall \u2014 a structural deficit \u2014 that Newsom and the Democratic-led Legislature solve with largely temporary fixes each year.<\/p>\n<p>Instead of making across-the-board program cuts or raising taxes to align spending with revenue, Democrats have tapped into reserves designed to preserve social services for the state\u2019s most disadvantaged communities during economic downturns. <\/p>\n<p>While the California economy remains stable and state revenue has increased, Newsom and lawmakers have taken $12.2 billion from the rainy day fund. Democrats have borrowed  $28 billion more from other state funds to cover their spending in recent years, according to the LAO.<\/p>\n<p>\u201cTaken together, these trends raise serious concerns about the state\u2019s fiscal sustainability,\u201d Legislative Analyst Gabriel Petek wrote in a <\/p>\n<p>Fiscal watchdogs have warned that the spending trends will leave California in a precarious position if the stock market tanks and tax receipts bottom out. <\/p>\n<p>Personal income taxes are driving higher-than-expected revenue now, which analysts attribute to an artificial intelligence boom on Wall Street, and suggest the state could have no deficit in the upcoming year. In January, the Newsom administration anticipated significant operating deficits in the years ahead: $27 billion in 2027-28, $22 billion in 2028-29 and $23 billion in 2029-30. <\/p>\n<p>The LAO, the Legislature\u2019s nonpartisan fiscal advisor, said the state has already solved  with mostly short-term solutions. <\/p>\n<p>\u201cThis issue is really whether they\u2019re going to take seriously the structural deficit that is several years in the making now, where the spending has outpaced revenue, and to address that, they\u2019re going to either have to make some fairly deep cuts or raise revenue and or both,\u201d said former state Controller Betty Yee, who worked as a budget aide under Gov. Gray Davis and recently dropped her own campaign for governor. \u201cBut they have to be real. I think resorting to these one-time solutions has really exacerbated the problem.\u201d<\/p>\n<p>How Newsom wants to address the state\u2019s financial challenges will be revealed on May 14 when he is expected to present his revised budget plan in Sacramento. His January budget proposal did not include any significant reductions or cuts to programs. <\/p>\n<p>H.D. Palmer, a spokesperson for the California Department of Finance, said the governor is looking to solve the budget problem with more than a temporary fix.<\/p>\n<p>\u201cAlthough he is still finalizing his proposal that he\u2019ll put forth to the Legislature, as he has said, he wants those solutions to be durable, and he wants them to have an impact beyond a single fiscal year,\u201d Palmer said.<\/p>\n<p>To stabilize California\u2019s budget, Democrats will probably have to raise taxes or fees to generate new revenue and cut programs, according to the LAO. At least 40 cents for every dollar in revenue is dedicated to education under the state Constitution, requiring policymakers to find between $30 billion and $60 billion annually in additional revenue to cover projected shortfalls in 2027-28 and beyond if relying on new taxes alone.<\/p>\n<p>President Trump\u2019s cuts to healthcare are adding to the problem. <\/p>\n<p>HR 1 will add $1.4 billion in state costs to the general fund. Newsom\u2019s January budget proposal did not include a plan to help millions of low-income Californians who are expected to lose access to healthcare under the federal cuts. <\/p>\n<p>To temper those cuts in California, other groups proposed a new tax on billionaires that appears poised to qualify for the November ballot.<\/p>\n<p>Spearheaded by Service Employees International Union-United Healthcare Workers West, the initiative would apply a one-time 5% tax on taxpayers with assets exceeding $1 billion. If approved by voters, the tax would generate roughly $100 billion, which would fund healthcare programs.<\/p>\n<p>The measure has divided unions and Democrats at the state Capitol.<\/p>\n<p>Newsom has criticized the initiative, citing concerns that increasing taxes on the wealthy will have the opposite intended effect and drive the highest earners out of California. Under a progressive tax structure, the state budget is dependent on income taxes paid by the ultra-rich on earnings largely from capital gains.<\/p>\n<p>Larry Page and Sergey Brin, the co-founders of Google, have already purchased residences in Florida, along with others <u>looking to escape the tax if it goes through in November.<\/u> Billionaires launched their own ballot measure campaign to undercut the tax proposal.<\/p>\n<p>State lawmakers are also considering avenues to raise revenue, which include repealing a \u201cwater\u2019s edge\u201d tax break. Under the change, multinational companies would no longer be allowed to shield the income of their foreign subsidiaries from state taxes. California loses about $3 billion in revenue from the tax break each year. <\/p>\n<p>In its budget plan released in April, the state Senate proposed a new fee on the largest corporations in the state to provide $5 billion to $8 billion annually for Medi-Cal. <\/p>\n<p>Read more <a href=\"https:\/\/california-relocation-journal.com\/?p=250\">Top takeaways from fiery, at times ugly, California governor debate on CNN<\/a><\/p>\n<p>The upper house said 42% of Medi-Cal enrollees are full-time workers who are not enrolled in their company\u2019s healthcare plan because their wages are low enough to qualify for state-subsidized healthcare. As a result, corporations aren\u2019t paying for healthcare for many of their employees and instead taxpayers are picking up the bill through Medi-Cal.<\/p>\n<p>SEIU California, the powerful state union council representing over 700,000 workers, endorsed the plan. The union said Trump\u2019s tax policy will reduce corporate taxes by $900 billion, while 3 million Californians lose healthcare. <\/p>\n<p>\u201cIn this urgent moment, California\u2019s workers need to see our leaders show us what they\u2019re made of,\u201d said Tia Orr, executive director of SEIU California. \u201cThe Senate is showing the courage to demand corporations pay their fair share, rather than making working people pay with their lives.\u201d<\/p>\n<p>The change is being described as a more politically palatable \u201cfee\u201d and not a tax. <\/p>\n<p>\u201cWe explored multiple revenue options, and this was the one that felt more narrow, it felt more focused, and it also felt like it was directly going for the subsidy that\u2019s being lost because of the Trump HR 1 cuts,\u201d said Senate President Pro Tem Monique Lim\u00f3n (D-Goleta), who leads the upper house of the Legislature.<\/p>\n<p>Lim\u00f3n said her caucus believes it\u2019s important to address potential revenue streams because of the depth of federal healthcare reductions. <\/p>\n<p>\u201cIf we don\u2019t address the structural deficit, we are looking at severe cuts,\u201d she said. \u201cYou are looking at people without health insurance. You are looking at hospitals closing down. You are looking at medical providers not being able to take more patients. You are looking at our emergency rooms over capacity, with not enough medical providers. I mean, you\u2019re looking at a place that\u2019s really, really, really difficult, and we feel like we have to, at least, look at what are viable options that are conditional on these cuts coming.\u201d<\/p>\n<p>Newsom has not commented publicly on the Senate\u2019s plan. As governor, he\u2019s been reluctant to embrace new taxes and fees. <\/p>\n<p>Newsom could reject all the proposals for new taxes or fees and continue what he\u2019s done before: take advantage of higher-than-expected tax collections, shift funds around, delay program implementation and borrow money to knock the deficit down to zero, or forecast a surplus, for his last budget year that begins July 1. <\/p>\n<p>If he doesn\u2019t take on California\u2019s larger budget imbalance, then the problem would be the next governor\u2019s to solve. A stock market crash, or economic recession, could force his successor to make drastic cuts across the board with limited reserves to support programs.<\/p>\n<p>Kicking the can again would cement Newsom\u2019s fiscal legacy as a governor who championed bold headline-making policies that bolstered the safety net for low-income Californians, but who failed to provide a solution to pay for his agenda. <\/p>\n<p>\u201cNot only has he not come up with a plan, he has pretended we don\u2019t need one,\u201d said Patrick Murphy, a professor of public affairs at the University of San Francisco.<\/p>\n<p>Newsom\u2019s interest in running for president could seemingly discourage him from slashing the budget and raising attention to the state\u2019s financial woes, Sragow said. Newsom is setting himself up as a potential front-runner for his party. He has said he remains undecided about officially launching a 2028 campaign. <\/p>\n<p>As a Democrat from California, his opponents would automatically label him as financially irresponsible and tax-happy. Calling out the massive budget problem on the horizon, raising taxes and making painful cuts will give them ammunition.<\/p>\n<p>\u201cThere\u2019s a long list of things that he\u2019s going to be charged with, and this is likely to be one more,\u201d Sragow said. \u201cBut I guess the question is, is he going to be charged with a political misdemeanor or a political felony?\u201d<\/p>\n<p>Former state Sen. Steve Glazer said Newsom is standing on political quicksand either way. State budget projections are based on assumptions about the future that often don\u2019t bear out, leaving his choices exposed to criticism that he went too far, didn\u2019t do enough, and everything in between. <\/p>\n<p>\u201cWhatever the governor decides to do in his May revise and in his final budget, it\u2019s fraught with political risks, because it can be manipulated so easily by all sides,\u201d Glazer said.<\/p>\n<p>If Newsom ignores the spending problem, his successor could blame him for California\u2019s financial woes when they take office in January and provide their own outlook of the state\u2019s fiscal future. At the time, Newsom could be trying to convince America to make him the nation\u2019s next president. <\/p>\n<p>Murphy said Newsom has championed major policies and been reluctant to back off them later when revenue doesn\u2019t pencil out. <\/p>\n<p>In terms of spending, he\u2019s governed similarly to the men who led California before him, with the exception of Jerry Brown, who cut programs to reduce a deficit he inherited in his second stint in the governor\u2019s office and left Newsom with a surplus. <\/p>\n<p>\u201cIt\u2019s not all that different than most of the governors have done, which is finding it very hard to say no and finding it very hard to take on a tough choice of going to the ballot to ask for more money or raise taxes,\u201d Murphy said.<\/p>\n<p>On taxation, Newsom is perhaps most similar to former Gov. George Deukmejian, who opposed general tax increases for most of his administration. <\/p>\n<p>Deukmejian left a budget disaster for his successor, Gov. Pete Wilson. Deukmejian publicly claimed he passed a balanced budget in his final year and blamed an economic downturn for the problems Wilson encountered.<\/p>\n<p>When Wilson announced a record $13-billion budget deficit early in his first year in office in 1991, he said the Persian Gulf War, an economic downturn and natural disasters added to a structural deficit in the budget.<\/p>\n<p>Read more <a href=\"https:\/\/california-relocation-journal.com\/?p=248\">California under pressure \u2014 again \u2014 as partisan redistricting wars escalate<\/a><\/p>\n<p>The Legislature and Deukmejian, Wilson said, had \u201cpapered over\u201d the problem.<\/p>\n<\/p><\/div>\n","protected":false},"excerpt":{"rendered":"<p>Whether Gov. Gavin Newsom solves California&#8217;s chronic spending deficit or dumps the problem on the next governor will define his legacy as a steward of trillions in taxpayer dollars.<\/p>\n","protected":false},"author":1,"featured_media":253,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[2],"tags":[],"class_list":["post-254","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-politics"],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v27.5 - https:\/\/yoast.com\/product\/yoast-seo-wordpress\/ -->\n<title>Taxes, program cuts and Newsom\u2019s legacy on the line in budget negotiations - California Relocation Journal<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/california-relocation-journal.com\/?p=254\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Taxes, program cuts and Newsom\u2019s legacy on the line in budget negotiations - California Relocation Journal\" \/>\n<meta property=\"og:description\" content=\"Whether Gov. 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Gavin Newsom discusses his proposed state budget for the 2024-2025 fiscal year, during a news conference in Sacramento,Calif., Wednesday, Jan. 10, 2024. Newsom and Democratic state leaders announced on Thursday, April 4, 2024, they had come to an agreement on a plan that would reduce the state's staggering multibillion-dollar shortfall by $17.3 billion through a combination of spending cuts, delays and deferrals. 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Gavin Newsom solves California's chronic spending deficit or dumps the problem on the next governor will define his legacy as a steward of trillions in taxpayer dollars.","og_url":"https:\/\/california-relocation-journal.com\/?p=254","og_site_name":"California Relocation Journal","article_published_time":"2026-05-08T07:01:29+00:00","author":"admin","twitter_card":"summary_large_image","twitter_misc":{"Written by":"admin","Est. reading time":"11 minutes"},"schema":{"@context":"https:\/\/schema.org","@graph":[{"@type":"Article","@id":"https:\/\/california-relocation-journal.com\/?p=254#article","isPartOf":{"@id":"https:\/\/california-relocation-journal.com\/?p=254"},"author":{"name":"admin","@id":"https:\/\/california-relocation-journal.com\/#\/schema\/person\/b85b48ca4c2015dd056e0e9c18912121"},"headline":"Taxes, program cuts and Newsom\u2019s legacy on the line in budget negotiations","datePublished":"2026-05-08T07:01:29+00:00","mainEntityOfPage":{"@id":"https:\/\/california-relocation-journal.com\/?p=254"},"wordCount":2124,"commentCount":0,"publisher":{"@id":"https:\/\/california-relocation-journal.com\/#organization"},"image":{"@id":"https:\/\/california-relocation-journal.com\/?p=254#primaryimage"},"thumbnailUrl":"https:\/\/california-relocation-journal.com\/wp-content\/uploads\/2026\/05\/8ecfb00d97649bf95760155d13d70f55-5-scaled.jpg","articleSection":["Politics"],"inLanguage":"en-US","potentialAction":[{"@type":"CommentAction","name":"Comment","target":["https:\/\/california-relocation-journal.com\/?p=254#respond"]}]},{"@type":"WebPage","@id":"https:\/\/california-relocation-journal.com\/?p=254","url":"https:\/\/california-relocation-journal.com\/?p=254","name":"Taxes, program cuts and Newsom\u2019s legacy on the line in budget negotiations - California Relocation Journal","isPartOf":{"@id":"https:\/\/california-relocation-journal.com\/#website"},"primaryImageOfPage":{"@id":"https:\/\/california-relocation-journal.com\/?p=254#primaryimage"},"image":{"@id":"https:\/\/california-relocation-journal.com\/?p=254#primaryimage"},"thumbnailUrl":"https:\/\/california-relocation-journal.com\/wp-content\/uploads\/2026\/05\/8ecfb00d97649bf95760155d13d70f55-5-scaled.jpg","datePublished":"2026-05-08T07:01:29+00:00","breadcrumb":{"@id":"https:\/\/california-relocation-journal.com\/?p=254#breadcrumb"},"inLanguage":"en-US","potentialAction":[{"@type":"ReadAction","target":["https:\/\/california-relocation-journal.com\/?p=254"]}]},{"@type":"ImageObject","inLanguage":"en-US","@id":"https:\/\/california-relocation-journal.com\/?p=254#primaryimage","url":"https:\/\/california-relocation-journal.com\/wp-content\/uploads\/2026\/05\/8ecfb00d97649bf95760155d13d70f55-5-scaled.jpg","contentUrl":"https:\/\/california-relocation-journal.com\/wp-content\/uploads\/2026\/05\/8ecfb00d97649bf95760155d13d70f55-5-scaled.jpg","width":2560,"height":1707,"caption":"FILE - California Gov. Gavin Newsom discusses his proposed state budget for the 2024-2025 fiscal year, during a news conference in Sacramento,Calif., Wednesday, Jan. 10, 2024. Newsom and Democratic state leaders announced on Thursday, April 4, 2024, they had come to an agreement on a plan that would reduce the state's staggering multibillion-dollar shortfall by $17.3 billion through a combination of spending cuts, delays and deferrals. 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