“As the 2024 general election begins in earnest, voters’ assessment of the economy and of the candidates’ ability to manage it will, as usual, have a strong impact on the outcome of the race,” Brookings Institute stated in a recent analysis of economic attitudes. “With little more than seven months until Election Day, the economy remains a key advantage for former President Donald Trump, and a drag on President Biden’s reelection prospects.”

Biden needn’t worry about losing California to Trump, but it has one of the nation’s highest rates of inflation, according to Moody’s Analytics, worsening its already outlandishly high costs of housing and other living expenses. It’s the biggest factor in California having the highest level of functional poverty of any state, 13.2% according to the U.S. Census Bureau, about 50% higher than the national rate.

The Public Policy Institute of California, using similar statistical methodology, has found that a quarter of Californians are either living in poverty or financially close. More recently, the PPIC has explored the impact of inflation, especially on California families which struggle to pay for housing, food and other necessities.

In 2018–19, PPIC reported, “these necessities cost California’s low-income households about $26,000, on average; by 2024, these households would need to spend over $32,000 on the same goods and services. By comparison, the top income group spent on average $82,000 on these basics in 2018–19, which would now cost nearly $100,000 in 2024.”

The PPIC has found that “prices have increased unevenly across goods and services – with varying effects across households at different income levels. Food prices are up 27% compared to April 2019, and gasoline is up 29%. While expenditures on these goods and services make up large portions of most household budgets, lower-income households spend almost all of their resources (83%) on food, housing, transportation (including gasoline), and health care.”

Obviously those on the lower rungs of the economic ladder have more difficulty adjusting to increases in living costs. It’s not hyperbole to say that inflation is a major reason why so many Californians cannot move up that ladder.

Meanwhile, efforts to curb inflation have a compounding effect. The Federal Reserve System maintains high interest rates to cool off the economy and bring down inflation, but those interest rates make home ownership more difficult and affect businesses, which often raise the prices of goods and services to maintain profits.

By happenstance, the PPIC issued its report on inflation on the same day that BravoDeal, a website devoted to helping consumers find bargains, released its study of fast food prices, comparing four popular chains state-by-state.

Overall, fast food outlets in Mississippi had the lowest prices while those in Hawaii were the highest, followed by New York, New Jersey and California.

For example, a McDonald’s Big Mac costs an average of $5.11 in California but just $3.91 in Mississippi.

Dan Walters is a CalMatters columnist.

The outcome of Democratic President Joe Biden’s replay battle with Republican predecessor Donald Trump – assuming that both are nominated – is very much in doubt nationally. However, Biden can count on winning California’s 54 electoral votes, probably by a landslide.

Rep. Adam Schiff will be elected to the U.S. Senate over token Republican rival Steve Garvey. Democrats will continue to enjoy supermajority control of the state Legislature.

While Democrats will capture the vast majority of the California’s 52 congressional seats, there are about a half-dozen in play, enough to potentially determine which party controls the House of Representatives.

The real action this fall will be the fate of as many as 15 statewide ballot measures: four placed on the ballot by the Legislature’s majority Democrats, one referendum seeking to overturn a new law regulating the placement of oil wells, and potentially 10 initiatives.

Taken as a whole, the ballot measures represent fundamental ideological and cultural clashes – particularly those sponsored by business and aimed at blunting the left-leaning policies of dominant Democrats and their allies. If passed, they would have massive financial impacts.

The scale of the conflicts is most evident in an initiative, sponsored by the Business Roundtable and anti-tax groups, that would make state and local tax increases markedly more difficult to enact.

It hits Democrats and their allied public employee unions where they live and they have mounted a two-pronged effort to block passage: a lawsuit, now pending in the state Supreme Court, to strike the measure from the ballot, and a competing proposition that would impose a higher and potentially prohibitive vote threshold on the tax measure.

June 27 is the deadline for finalizing which measures will appear on the ballot, so both sides of the tax battle are awaiting the court’s decision.

However, they aren’t the only ones because advocates and foes for four other initiatives still await confirmation that they have enough signatures to qualify. The quartet includes an initiative that would modify Proposition 47, a 2014 ballot measure that reduced penalties for many crimes.

Prop. 47 symbolizes the last decade’s strenuous efforts – through both ballot measures and legislation – to undo the tough-on-crime sentencing laws that were enacted in the 1980s and 1990s, most famously the Three Strikes law.

The laws pushed California’s prison population well past 160,000, an eightfold increase from 1980, resulting in federal court decrees to reduce overcrowding. Since then, the number of felons behind bars has dropped by nearly half, but spikes in crime in recent years have sparked a backlash, encapsulated in the pending ballot measure, which probably will qualify for the ballot.

Other high-profile measures either qualified or likely to qualify include a business-sponsored initiative that would repeal the Private Attorneys General Act, a two-decade-old union-sponsored law that makes class action lawsuits against employers relatively easy to file. Others include a third effort to make it easier for local governments to enact rent control, a boost in income taxes on high-income Californians to finance pandemic prevention, and an increase in the state’s minimum wage.

Given the immense financial stakes in these ballot measures, voters will be subjected to hundreds of millions of dollars in radio, television and internet ads. In fact, the propaganda barrage is already underway.

Dan Walters is a CalMatters columnist.

With scarcely two weeks remaining until the June 15 constitutional deadline for passing a new state budget and less than a month for ballot measures to be finalized for the November election, there are dozens, or even hundreds, of individual issues to be resolved.

Most are to be found in the much-revised 2024-25 budget that Gov. Gavin ɫ����̳om unveiled earlier this month.

Acknowledging that the budget had a substantially bigger deficit than he declared in January, ɫ����̳om set aside his original strategy of using state reserves and paper maneuvers to avoid major spending reductions. The revised version reduces reliance on reserves and makes billions of dollars in real reductions.

Last week, the Legislature’s budget analyst, Gabe Petek, gave a qualified thumbs-up to the revision for its more realistic approach, even though he still has some differences with the administration on revenue estimates and multi-year deficit projections.

“The May revision puts the state on better fiscal footing and makes substantial progress toward structural balance,” Petek’s office said in an analysis.

Petek had been especially critical of ɫ����̳om’s approach to the budget’s largest single item, financial support for public schools, saying it would create problems in future years. The politically powerful California Teachers Association disliked it as well, and aired video ads criticizing it as a major reduction in school support.

The union’s pressure campaign apparently worked because Politico reported Tuesday that ɫ����̳om had cut a deal with CTA based on a promise to increase school support by $5.5 billion in future years.

So that’s apparently one deal done. But as ɫ����̳om negotiates with legislators on a budget to enact by June 15 – which may not be the final version – he still faces demands from dozens of interests affected by spending cuts that they be rescinded.

Just one of many examples occurred Tuesday, when a coalition of health care and civil rights groups staged a press conference to denounce the revised budget’s elimination of home care services for 1,500 elderly or disabled undocumented immigrants to save $94.7 million.

“It is unacceptable to balance the state’s budget on the backs of the poorest and most vulnerable Californians,” the coalition declared. “Rather than eliminating programs that impact the state’s poorest residents, the advocates will urge the Legislature to consider more progressive solutions to ensure California has the resources needed to care for the most vulnerable Californians.”

Multiply that criticism by 100 or more and it’s the kind of pressure being placed on ɫ����̳om and a left-leaning Legislature.

As ɫ����̳om, legislative leaders and interest groups dicker over the budget, they are also working on potential deals to short-circuit battles over ballot measures.

They are waiting to see whether the state Supreme Court will accept pleas from ɫ����̳om and legislative leaders to block a measure that would sharply increase restrictions on new taxes. They are also trying to work out a legislative package on crime that would assuage backers of a ballot measure to overhaul Proposition 47, a 2014 measure that reduced certain criminal penalties.

If there’s a deal before June 27, the pending November measure would be dropped.

Dan Walters is a CalMatters columnist.

Media reports of ɫ����̳om’s appearance centered on his verbal potshot at former President Donald Trump and his conversation with Pope Francis who, ɫ����̳om said, praised his unilateral suspension of executions in California.

However, the governor did devote a little time to climate change, mostly reiterating his villainization of the oil industry.

“It’s because of the burning of gas, the burning of coal, the burning of oil,” ɫ����̳om said. “We have the tools. We have the technology. We have the capacity to address the issue at a global scale and they’ve been fighting every single advancement and we have got to call that out.”

At this point, we should remind ourselves that ɫ����̳om’s constant gallivanting to polish his image as a political heavyweight depends on planes and automobiles that burn petroleum. Nevertheless, he has proclaimed that California will by 2045, just 21 years hence, become carbon emission-neutral.

In 2022, the state Air Resources Board issued a “scoping plan” with multiple precise steps to achieve the goal. ɫ����̳om hailed it as “a comprehensive roadmap to achieve a pollution-free future” and, with characteristic hyperbole, “the most ambitious set of climate goals of any jurisdiction in the world … (that could) spur an economic transformation akin to the industrial revolution.”

That’s a lot to be done in just a couple of decades, and there’s not been a particularly noticeable amount of progress. In fact, there’s been some regression.

It’s questionable whether California will have enough power from solar panels and windmills not only to fill current demand but supply additional juice for the many millions of battery-powered cars and trucks that the plan envisions.

Fearing blackouts, ɫ����̳om pressed to keep some natural gas-fired power plants and the state’s only nuclear-powered plant operating past their planned phaseout dates. Electric car sales have languished, even though automakers are supposed to quit selling gasoline- and diesel-powered vehicles in just 11 years. Car buyers are leery because the state still has only a fraction of the recharging stations conversion requires.

Furthermore, to deal with a budget crisis, ɫ����̳om has slashed spending on climate change programs.

One of the biggest unknowns about a carbon-neutral future, however, is the impact on economic sectors that depend on transportation. A new report on one of those sectors, Southern California’s logistics industry, frames the issue.

A half-century ago, Southern California’s leaders bet the region’s future on the twin ports of Los Angeles and Long Beach becoming the nation’s primary conduit for trade with Asia, and the transportation and warehousing facilities to handle cargo.

The new report from the California Center for Jobs and the Economy, an offshoot of the California Business Roundtable, reveals how impressively that goal has been achieved.

However, global transportation is a cutthroat business and the twin ports have seen their traffic decline in recent years due to competition from ports with lower operational costs. The sector is also being pressed by state and local authorities to convert ships, trucks, locomotives and other machinery to low- or no-emission propulsion, at huge cost. There has been a backlash against the massive warehouse complexes in inland areas.

Can the industry undergo the massive conversion ɫ����̳om’s plan envisions in just 21 years – without becoming terminally uncompetitive and shedding the jobs on which so many of the region’s families depend?

It’s a microcosm of the larger uncertainty.

Dan Walters is a CalMatters columnist.

“When considering the 8.84 % corporate tax – which is the highest, arguably, depending on how you analyze it, in the country – no, I’m not prepared to increase taxes,” ɫ����̳om replied. “We have among the highest tax rates in the United States of America for high wage earners, we have among the highest tax rates, as I noted, for corporate taxes. … I feel strongly that we have to live within our means.”

However, the fine print of ɫ����̳om’s budget contains several indirect tax increases on businesses – mostly by reducing offsets of taxable income – that over the next few years would raise as much as $18 billion.

That number comes from the California Taxpayers Association, which pulled together tax-related items from the budget and the dozens of budget trailer bills submitted to the Legislature. It approximates the $6 billion year in income and sales taxes that ɫ����̳om’s predecessor, Jerry Brown, persuaded voters to approve in 2012 to close an earlier deficit.

The biggest, in terms of financial impact, would eliminate the ability of corporations with annual revenues over $1 million to deduct net operating losses from their taxable incomes and limit business tax credits to $5 million a year. CalTax estimates it would increase corporate tax revenue by $15.9 billion over the next four years.

It would not be the first time that the state has limited or eliminated the net operating loss deduction, a history that the Legislature’s budget analyst, Gabe Petek, cited in an analysis of the maneuver.

The deduction, Petek said, “allows businesses to smooth profits and losses such that businesses with similar profits over time pay similar taxes. Without this smoothing, businesses in riskier or more innovative industries – such as the technology, motion picture, and transportation sectors – could end up paying more taxes than businesses with similar but more stable profits. As such, suspending NOL deductions would lead to a less equitable tax system.

“Should the governor’s proposal take effect, the state will have disallowed NOL deductions in nearly half of years between 2008 and 2027,” Petek continued. “At this rate, it seems reasonable to ask whether suspensions have begun to meaningfully undermine the purpose of allowing NOL deductions in the first place.”

The second largest – and perhaps most intriguing – indirect tax increase ɫ����̳om proposes is to overturn a recent decision of the state Office of Tax Appeals favoring Microsoft in a complex, years-long dispute with the Franchise Tax Board over the tax treatment of foreign earnings.

However, the administration’s trailer bill would nullify the ruling by declaring that the FTB correctly applied the law. It would be in effect retroactively and potentially allow the FTB to promulgate new regulations to enforce without going through the normal rule-making processes.

In addition to its fiscal impacts, the legislation sets a questionable precedent of retroactively changing tax laws after taxpayers have won appeals. Such ex post facto legislation undermines the integrity of the tax system.

If nothing else, ɫ����̳om’s proposals underscore again the premise that declaring who or what is taxed is an arbitrary political act, not a rational exercise.

Dan Walters is a CalMatters columnist.

This year is no exception as Gov. Gavin ɫ����̳om faces stiff opposition from the education establishment for a new fiscal maneuver to cope with a massive budget deficit.

A bit of history places it in context.

Until the 1970s, local school systems were financed almost entirely from property taxes. Since the amount of taxable property varied widely from district to district, so did their revenues. Districts with high levels of commercial and industrial property could generate large amounts of revenue with low rates, but those with little taxable property other than housing had to impose high rates.

In 1971, the state Supreme Court declared that the disparity unconstitutionally “discriminates against the poor because it makes the quality of a child’s education a function of the wealth of his parents and neighbors.” The state was ordered to adopt “equalization” in state aid to reduce the differences and it immediately became an annual budget issue.

In 1975, Jerry Brown’s first year as governor, Republicans blocked passage of his budget, demanding more equalization money because schools in GOP-leaning suburbs, lacking big commercial or industrial properties, were often on the short end of the disparity.

The game changed again in 1978 when voters passed Proposition 13, imposing tight limits on property taxes. The state responded with a bailout to prop up schools and local governments as property tax revenues plummeted.

With the state having become the primary source of school support, education groups in 1988 sponsored another ballot measure, Proposition 98, creating a very complex formula to determine schools’ share of the budget.

Prop. 98 did not, however, stop the political infighting. It just made it much more complicated due to differing interpretations over what it required and how it would be enforced, particularly during the state’s periodic deficits.

A few years after Prop. 98’s passage, for instance, then-Gov. Pete Wilson and the Legislature created the Educational Revenue Augmentation Fund, which diverted more local property tax money to schools, therefore reducing the required appropriation from a state budget leaking red ink. It forced local governments to eat a multibillion-dollar shortfall that was later bridged by a state sales tax increase.

This year’s version is another rob-Peter-to-pay-Paul maneuver that would remove $8.8 billion in overpayments of state aid from previous years from the budget and treat it, in effect, as a off-the-books loan to be written off over five years. Concurrently the state would tap a special education reserve fund for $8.5 billion shore up the state budget.

Gabe Petek, the Legislature’s budget analyst, has been highly critical of this maneuver, saying it is “bad fiscal policy, sets a problematic precedent, and creates a binding obligation on the state that will worsen out‑year deficits and require more difficult decisions.”

“This maneuver may seem innocuous on its face – or even generous – as it could ease the pain of the 2024–25 budget,” the California School Boards Association declared. “Yet, in reality, this sleight of hand would reduce education funding by tens of billions of dollars in the years to come and remove the funding safety net Proposition 98 has provided schools for more than three decades.”

California Teachers Association President David Goldberg called the budget maneuver “an outright assault on public school funding” that would “wreak havoc for years to come.”

The CSBA and the CTA have often been at odds, but are united this year and threatening lawsuits if ɫ����̳om’s plan is enacted. In other words, it’s just another normal year in the abnormal world of school finance.

Dan Walters is a CalMatters columnist.

Exactly two years earlier, ɫ����̳om boasted as the state enjoyed a $97.5 billion budget surplus, thanks to surging revenues from the post-pandemic economic recovery.

“No other state in American history has ever experienced a surplus as large as this,” ɫ����̳om said as he unveiled a revised $300 billion 2022-23 budget, which was $14 billion higher than his original proposal.

The budget he signed a month later was even larger, $307 billion, with immense new commitments, including cash payments to poor families and expansions of health care and early childhood education.

So, one must wonder, how did a $97.5 billion surplus morph into a huge deficitand a budget that is pulling back much of the new spending ɫ����̳om and the Legislature had so eagerly approved?

The new budget takes a stab at answering the question, basically saying that revenues fell well short of projections.

“Due to the revenue spike from 2019-20 to 2021-22, the budget acts of 2021 and 2022 were based on forecasts that projected substantially greater revenues in the last two fiscal years than occurred,” the budget declares.

However it doesn’t reveal why those erroneous projections were made in the first place.

In 2022, ɫ����̳om’s budget staff evidently looked at a spike in tax revenue as the state’s economy recovered from the pandemic, mostly due to massive amounts of federal relief funds, and concluded that the cornucopia would continue indefinitely.

That conclusion – or wishful thinking – led to extrapolating that a $97.5 billion surplus would emerge in 2022-23 and future years. However that number never appears in budget documents and was merely a verbal boast from ɫ����̳om.

A chart in the newly revised 2024-25 budget contains the pertinent numbers of the miscalculations.

According to the chart, the 2022-23 budget projected that revenues from the state’s three biggest sources – personal and corporate income taxes and sales taxes – would top $200 billion through 2025-26. In fact, however, they have fallen well short of that level every year since, and are now expected to remain far below for the remainder of ɫ����̳om’s governorship.

“The total difference across the four fiscal years is a negative $165.1 billion,” the new budget declares.

That’s an enormous amount of money that ɫ����̳om thought the state would be receiving but didn’t – a phantom surplus that fueled unsustainable spending.

The administration was also not alone in assuming in 2022 that the state was on the verge of a big increase in budget revenues. The Legislature’s budget analyst, Gabe Petek, largely confirmed ɫ����̳om’s rosy 2022 projections, tabbing revenues from income and sales taxes to hit $214 billion by 2023-24, $36 billion more than the current revenues from those taxes.

Their error apparently reflected models for revenue forecasts that are outdated, particularly when judging how wealthy Californians fare in taxable earnings on investments – a major but very volatile aspect of the revenue stream.

ɫ����̳om is proposing a couple of budget process changes to adjust for the volatility in addition to the current practice of setting aside rainy-day reserves. He would not spend spike revenues until they are actually in hand, and write budgets that look ahead to future years.

Those are steps in the right direction. Spending money based on volatile revenue estimates is not only foolish but cruel because – as this year proves – it raises expectations that later turn to pixie dust.

Dan Walters is a CalMatters columnist.

California’s recovery from the devastating economic impacts of the COVID-19 pandemic has been sluggish at best, trailing what’s happening in the nation as a whole and in the state’s archrivals, such as Texas and Florida.

According to Employment Development Department data, there are 200,000 fewer Californians in the labor force – those employed or seeking employment – than there were in February 2020, just before the pandemic exploded. There are 500,000 fewer employed, and 200,000 more unemployed.

While California’s unemployment rate of 5.3% in March was just a third of what it was at the height of the pandemic-induced recession, it was still the highest of any state, markedly higher than the national rate of 3.9% and nearly two percentage points higher than it was before the pandemic.

By the federal government’s more nuanced measure of employment called U-6, which counts not only the unemployed, but workers who are “marginally attached” to the labor force and those who are involuntarily working part time, the state’s 9.5% rate of underemployment is also the nation’s highest.

Those numbers imply an economy that’s not even operating at cruising speed, much less accelerating. Even the state’s technology sector, centered in the San Francisco Bay Area, has cooled off as its once high-flying corporations announce layoffs virtually every day.

“California’s civilian employment growth has been essentially flat since the second half of 2022 while the U.S. has remained relatively healthy, resulting in the state’s unemployment rate rising faster than the nation,” the revised budget ɫ����̳om unveiled last week acknowledges.

The pandemic erased about 3 million jobs in California as ɫ����̳om shut down large segments of the state’s economy. Countless employers, particularly small businesses, never reopened after the health crisis eased and those that did survive have had to contend with inflationary costs, tighter loan conditions and changed consumer habits.

The budget blames stubborn inflation and the high interest rates imposed by the Federal Reserve System to tame inflation for California’s slowdown, but economies of other states have experienced the same factors and prospered despite them.

However, they don’t contend with factors unique to California, such as extremely high costs for housing, utilities and labor that make job creation more difficult here. Until recently, California has been losing population, thanks to outward migration to other states. The state has also seen employment shifts, particularly in technology.

Those conditions underscore the sluggish recovery that sets California apart from other states. For instance, Texas’ unemployment rate, 3.9%, is identical to the national rate while Florida’s 3.2% is even lower.

So, one might ask, where is California’s once-booming economy headed?

A few days before he released his revised budget, ɫ����̳om stood at the top of a Golden Gate Bridge tower to record a video celebrating the tourism industry’s recovery.

Visitors to California spent $150.4 billion last year, he said, surpassing the previous record of $144.9 billion in 2019.

That’s good news, even though an adjustment for inflation would probably reduce the recovery’s relative impact. But while it’s a high-profile economic sector, tourism is scarcely 3% of the state’s overall economy. It’s the other 97% we should be nurturing.

Dan Walters is a CalMatters columnist.

In addition to $75.76 in metered power consumption and $1.58 in taxes, SMUD’s bill included a $24.80 “system infrastructure fixed charge” that, frankly, I’d never noticed before in decades of receiving SMUD service.

Such charges, meant to pay for the upkeep of the system no matter how much juice is used, are commonly billed to customers of both publicly owned systems, such as SMUD, and investor-owned corporations, such as Pacific Gas and Electric Co., that are regulated by the California Public Utilities Commission.

Fixed charges collected by the latter have long been limited to $10 a month, but that’s about to change, thanks to legislation that was enacted in semi-secrecytwo years ago. A few words in a lengthy state budget “trailer bill,” Assembly Bill 205, repealed the $10 cap and ordered the CPUC to create a new charge that would vary by customers’ incomes.

PG&E and other utilities submitted proposals to the CPUC for fixed charges ranging from $20 a month to as much as $128 in three income tiers, as the law required. When they became public, a political firestorm ensued. Critics focused both on the income redistribution principle of the proposed charges and the rather sneaky way in which Gov. Gavin ɫ����̳om and the Legislature enacted them.

Eventually, the CPUC compressed the widely spaced tiers in the utilities’ proposals and approved a $24.15 fixed charge – roughly what SMUD and other municipal utilities have been billing – with $12 and $6 for those in lower-income brackets.

The CPUC’s plan also lowers rates for consumption, which will at least partially offset the fixed charges.

There’s nothing wrong, per se, with fixed charges for utility service. Customers should be charged for the maintenance of the distribution systems. However, there’s everything wrong with the way in which the new pricing scheme was enacted.

ɫ����̳om included it in one of the dozens of trailer bills his administration drafted for passage late in 2022-23 budget negotiations. It was enacted with virtually no discussion – a classic example of how trailer bills have become vehicles for governors and legislators to make major policy changes on the sly.

It should have been proposed in a separate bill disconnected from the budget, gone through committee hearings and other traditional legislative processes, including debates and floor votes in the state Senate and Assembly.

As a trailer bill, however, it was hastily enacted without such exposure. Thus, many of the legislators who would later criticize the change actually voted for AB 205 without knowing – or caring – what effect it would have.

Many – probably most – will in fact be related to the budget. But it’s dead certain that when their details are finally drafted, some will contain significant policy changes that have little or nothing to do with the budget.

Having been burned by AB 205, legislators should pay more attention to what they are being asked to do, and not just rubberstamp the forthcoming torrent of trailer bills.

The late H.L. Richardson was a Republican state senator in the 1970s and 1980s who pioneered the use of technology in political campaigns, with notable success. He also wrote a book, published in 1978, entitled “What Makes You Think We Read The Bills?”

The question is as relevant today as it was 46 years ago.

Dan Walters is a CalMatters columnist.

The gist of the complaints was that after ɫ����̳om and the Legislature had devoted attention and money to expanded health care coverage, prekindergarten education, income supports for the poor, undocumented immigrant assistance, homelessness, climate change and a myriad other left-of-center causes, the new budget would punish their recipients.

Building the California Dream Alliance, a consortium of nearly 60 groups, was among those disappointed with ɫ����̳om’s budget, issuing a compendium of comments from its members, including the Western Center on Law and Poverty.

“Although we appreciate the governor maintaining previous expansions and grants, his approach balances the budget on the backs of low-income Californians through over $3 billion in cuts,” Linda Nguy, an associate director of the organization, said. “Instead of considering additional revenue solutions, the governor proposes to cut in-home supportive services for people who were previously excluded from Medi-Cal due to their immigration status, deeper CalWORKs cuts, and continued cuts to housing and homelessness prevention programs.”

The League of California Cities, which has been sparring with ɫ����̳om over money to reduce homelessness, declared that ɫ����̳om’s budget “will hurt those already most vulnerable in our communities: the unhoused, those who are one paycheck, eviction, or natural disaster away from homelessness, and those struggling to find safe and affordable housing.”

While ɫ����̳om’s first budget proposal, issued in January, minimized spending reductions and relied mostly on emergency reserves, deferrals and accounting gimmicks to close what he said was a $38 billion deficit, this month’s revision raised the deficit to $44.9 billion in 2024-25 and projected another $28.4 billion gap in 2025-26.

Given those numbers, ɫ����̳om was forced – albeit reluctantly – to make some real spending cuts totaling nearly $34 billion over two years, almost half of the projected deficits.

“These are propositions that I’ve long advanced, many of them. These are things that I’ve supported,” ɫ����̳om said. “But you’ve got to do it. We have to be responsible. We have to be accountable. We have to balance the budget.”

As if to punctuate his position, ɫ����̳om’s Department of Finance issued a nine-page summary of more than 250 specific reductions for the two fiscal years.

It’s evident that many affected groups would, like the Western Center on Law and Poverty, prefer that ɫ����̳om seek tax increases to cover the state’s deficits. Although the budget does contain some direct and indirect tax increases on corporations and health care providers, they would have only marginal effects on the deficit and ɫ����̳om for the umpteenth time declared opposition to any general tax hikes.

ɫ����̳om is in his final term as governor and thus is insulated from negative reaction to his spending cuts or opposition to taxes in California. He is, however, trying to expand his national political profile and drifting rightward might help him in that endeavor.

Democratic legislators, on the other hand, must worry about voter backlash and have close ties to unions and other groups disappointed with the budget. Many would prefer to raise taxes or use more reserve funds rather than make the spending cuts that ɫ����̳om wants.

Underscoring the political tension is the worrisome possibility – or perhaps probability – that deficits in recent and future budgets are not just blips, but imply that California now has a “structural deficit” with a fundamental mismatch of income and outgo.

Dan Walters is a CalMatters columnist.