Sacramento’s Budget Dance Ends. Where Did the Music Stop?

Monday evening was the last time Gov. Gavin Newsom would put his pen to the state budget, solidifying a $351.7 billion deal he said puts the state on a solid financial footing until July 2028.

That footing, as the Legislative Analyst’s Office has warned at every turn, is heavily reliant on factors outside the state’s control, despite the state’s economic growth and venture capital investment cited by the governor.

The state currently has some $29 billion in its reserve account, with roughly $10 billion more in the surplus account. Newsom noted in his budget address that the state had also made significant headway in paying down $15 billion in long-term pension obligations.

But the good fiscal news was tempered by increases to taxes — namely on some businesses, healthcare providers and through a re-upped corporate tax — to further pad reserves and reduce the pain from federal allocation reductions.

Newsom noted that he had reached a deal with the Legislature to place the so-called “billionaire tax” as a constitutional amendment on the November ballot.

Critics, both inside and outside of the state, have frequently called on the leadership to control their spending rather than raising taxes, yet again. The governor’s proposed tax on pre-written software and software as a service was also part of the budget package.

As for the proposed Medi-Cal cuts floated in the governor’s May Revise, lawmakers were able to negotiate for delays. Those proposed cuts were a controversial sticking point this cycle, with many Democrats voicing concerns about the impacts they might have on undocumented residents.

In his recorded budget address, Newsom hammered on his usual talking points about the state’s successes — economic size, progressive tax structure, strategic investments — while also barbing at the policies of the Trump administration and the state of Texas.