Last week the news was all about the US House of Representatives passing another budget-busting bill that extends a streak of extraordinary federal spending growth since the pandemic. But California’s spending grew even more — much more. Federal spending in the 2024 fiscal year was 24% higher than in the year before the pandemic and the Congressional Budget Office forecasts 2025 spending to grow another three percent. But California’s 2024 spending was 50% higher than the year before the pandemic and 2025 spending is forecast to grow another nine percent.
In both cases deficits are the result. Under Presidents Biden and Trump the federal government has been covering its deficits by issuing Treasury notes and bonds. Under Governor Newsom California has been borrowing from surplus Special Funds and tapping General Fund reserves with the result that the next governor will have to govern with negative reserves. The state is also hiding the creation of new pension debts.
For years GFC has tried to influence state budgets but without much success. For that to change we will need a change-agent as governor and for GFC and similar organizations to back legislators who support that change-agent’s agenda.
PS: In case you read a recent WSJ editorial entitled California’s Five-Alarm Pension Fire, the bill referred to there is AB 1383, which we helped to stop in the Legislature last week. The opinion writer tells me she and her editor are aware the bill was stopped but they are concerned that it could get resurrected by Governor Newsom who in their view is competing with Illinois Governor Pritzker for government union support in his quest for the Democratic nomination for president. Who knows but you can be sure that GFC will keep an eye out for any such resurrection.
