Posted originally on Jan 13, 2025 by Martin Armstrong 

The Legislative Analyst Office (LAO) found that California is facing “double-digit operating deficits in the years to come” as a result of reckless government spending. For the 2025-26 period, the LOA believes the state may have a balanced budget but called Newsom’s spending and policies highly unpredictable. For now, the state has seen $11 billion in “spending-related solutions” and $15 billion in “other solutions,” which will ultimately become problems. Newsom already withdrew $7 billion from the rainy-day fund. The state is now banking on high-income citizens for tax revenue to accommodate its ever-increasing spending.

This report was compiled before the deadly wildfires caused uncalculated damage to EVERYONE, including the dreaded rich who the state expects to cover the spending gap. Newsom spent recklessly on everything but infrastructure.

Spending growth from 2025-26 to 2028-29 is 5.8%, above the average of 3.5%. Growth over the same period is just above 4%, “lower than its historical average largely due to policy choices that end during the forecast window. Taken together, we view it as unlikely that revenue growth will be fast enough to catch up to ongoing spending.”

The “good news” is that incomes are rapidly rising among high-income residents who the state will extort. The labor market remains soft but those at the top will be expected to fill the gaps. The rising stock market is contributing to growth in pay among high-income workers, with the report noting that those in California’s once booming tech field are seeing pay increases. As with all socialistic economies, the government sees your money as their money.

Tax collections are expected to beat expectations by $7 billion. “This is entirely due to improving income tax collections, which would, under our forecast, end the current year 20 percent higher than two years ago,” the report notes. Since no individual can predict future stock movement, the legislative office is uncertain how much they will ultimately be able to extort, but they believe revenues will be “above or below” $30 billion across the budget window.

The office is also banking on the Federal Reserve lowering interest rates, another unpredictable variable. Currently, the state is facing annual multiyear deficits around $20 billion to $30 billion, which is exactly what they are hoping to ultimately collect from citizens.

GOVERNMENT SPENDING is to blame for the budget failures. Every analysis says the same thing. The LAO suggests: “Legislature would need to address in the coming years, for example by reducing spending, increasing taxes, shifting costs, or using more reserves. The magnitude of these deficits also indicates that, without other changes to spending or revenues, the state does not have capacity for new commitments.”

Newsom has no plans to slow spending. While the state has absolutely no capacity for new spending commitments, state government will not comply. The state can either raise taxes or reduce spending, and ultimately, the current plan is to continually raise taxes and punish the people for government’s failures.