California budget: More state workers and higher spending
In releasing his May budget revise last week, Gov. Gavin Newsom announced some good news: "We're balancing the budget, eliminating the deficit, cutting spending, and building reserves - all while protecting healthcare, education and essential services for Californians." The governor points to zero deficits and claims no structural deficit until 2028.
There are plenty of nits to pick, with Republicans rightly noting that the cutting is slim, reliance on reserves heavy, and that Newsom is being too optimistic about the structural-deficit situation. And, of course, the good budget news isn't the result of any fiscal discipline, but rising revenues from the AI stock boom. That could all fade away in a downturn.
Nevertheless, there's no sense getting too agitated about a decent fiscal situation after a few years of intractable budget problems. But the most alarming news came from an April report from the nonpartisan Legislative Analyst's Office. Contra Newsom, the LAO pointed to $20 billion to $30 billion in enduring deficits, which "will likely persist without significant policy changes." That change would require the state to stop its profligate spending.
Again, per LAO, the state's general-fund budget has grown by an astounding $100 billion since Newsom's first budget for 2019-2020, from $146 billion to $248 billion. It found that "about 70% of this spending growth went to sustaining services that already existed in 2019‑20 while 30% went to expanding or creating new services since that time." That's mind blowing. Another item that caught our eye: the vast increases in state workers and compensation.
An analysis by the Sacramento Bee found that "the number of civil service positions has increased 23% between fiscal years 2017-2018 and 2024-2025." Based on LAO data, it explained that "state operation costs … account for 9% of that [overall spending] growth, which is primarily driven by increases to compensation for state employees."
It's hard to argue that California's public services have improved significantly under the governor's watch, so much of Californians' increased tax burden is due mainly to improving the job opportunities and compensation for government employees. We encourage readers to peruse the Transparent California database for the eye-popping details of public employee compensation packages - including pensions that far outpace those earned in the private sector.
Remember that as tax-raising efforts gain traction, including a proposed "billionaire's tax" that will send more wealthy people heading for lower-tax states. Given California's reliance on capital-gains revenue during boom periods, losing our wealthiest residents would further stress the budget. Even liberal sources agree that the wealth-driven tech sector is saving Newsom's last budget.
The LAO concluded that "policymakers will need to make difficult budgetary decisions in the years ahead." Alas, those will have to wait for future governors and legislators.
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This story was originally published May 15, 2026 at 9:32 AM.