In a recently released report, California’s Legislative Analyst Office (LAO) provides an analysis of the state’s General Fund budget condition including both revenue and expenditure estimates. For taxpayers, the news isn’t good. One of the more depressing conclusions from the report was the statement that, “As it stands — with larger forecasted deficits and many fewer tools available to address them — California’s budget is undeniably less prepared for downturns.” A more easily understood translation of this would be that state leaders are playing Russian Roulette with their bloated spending plan. If California, along with the rest of the nation, experiences even a mild recession, the financial condition of the state could deteriorate to a point where even higher taxes will be on the table, no doubt accelerating the exodus out of the formerly golden state.

According to the report, the state will face a nearly $18 billion budget “problem” this coming fiscal year due to higher-than-expected spending. (General fund spending invariably increases every year over and above inflation and population increases). During the governorship of Gavin Newsom, which began in 2019, the budget grew over 63% in five years. Particularly galling to California taxpayers – who must balance the family budget in a state with a punishingly high cost of living – is the fact that the deficits persist even with huge revenue increases. According to LAO, “Across 2024-25 to 2026-27, our revenue estimates are up $11 billion compared to the budget act.” But “these revenue improvements do not, on net, improve the budget’s bottom line, because they are mostly offset by provisions of the Constitution dictating much of state spending.”

So, while taxpayers are doing their part by dutifully paying their taxes, our elected political leadership fails to do its job of prioritizing spending. State Sen. Roger Niello of Roseville, the Republican vice chair of the Senate Budget Committee, hit the nail on the head by attributing the structural deficit to Democrats’ “unstoppable spending problems.” Speaking to CalMatters, Niello further stated that, “The state must assess the effectiveness and sustainability of the programs that were created during the surplus and make necessary corrections.”

Similarly, Republican Assemblyman David Tangipa, who serves on the Assembly Budget Committee, noted that the LAO report confirms that “California is staring down a $35 billion structural deficit. Meanwhile, states like Texas are running a $24 billion surplus. Even the LAO notes that despite higher taxes, revenue can’t keep up with the private jets, luxury hotels, and endless spending spree Democrat leaders are billing to the taxpayers. Californians are demanding leaders who will protect taxpayers, restore fiscal sanity, and stop the runaway spending that has pushed families and businesses out of our state.”

The LAO report recommends dealing with the budget challenges now rather than waiting until we have a full blown crisis, such as a recession. “While important components of the state economy are sluggish, revenues are not falling, nor are conditions as bad as they would be in an outright recession. This makes solving the budget problem with ongoing solutions all the more important. Continuing to use temporary tools— like budgetary borrowing—would only defer the problem and, ultimately, leave the state ill-equipped to respond to a recession or downturn in the stock market.”

We hope our elected leaders in Sacramento heed the advice of the Legislative Analyst rather than focusing on the silly issues that usually consume their time. The 2026-27 budget Kabuki Dance starts in January and, this year, it would be a welcome change if politicians actually took this responsibility seriously.

By Jon Coupal, Howard Jarvis Taxpayers Association

Jon Coupal is the President of the Howard Jarvis Taxpayers Association (HJTA), California’s largest taxpayers’ group with over 200,000 members, founded by Howard Jarvis, author of Proposition 13. A recognized expert in California fiscal affairs, Coupal served as HJTA’s Director of Legal Affairs from 1991 to 1998, overseeing litigation and lobbying. He has argued numerous tax cases, successfully defended Proposition 140 (term limits) and Proposition 62 (local tax voting rights) before the California Supreme Court, and drafted Proposition 218, the Right to Vote on Taxes Act (passed 1996). He led campaigns against Proposition 88 and Proposition 1A, served on Governor Schwarzenegger’s 2003 Transition Team, and chairs the Howard Jarvis Taxpayer Foundation. A frequent media commentator, Coupal writes a weekly column and holds a J.D. from the Marshall-Wythe School of Law, with prior experience at the Pacific Legal Foundation specializing in tax and political law.