California's state spending has seen a dramatic increase of approximately 70% during Governor Gavin Newsom's seven years in office, culminating in a $356 billion budget approved by Democratic legislators this week. When Newsom assumed the governorship in 2019, the state's budget stood at around $209 billion. The $147 billion increase, or 40% after accounting for inflation, reflects a governing philosophy that prioritizes expanding government programs.
The surge in spending outpaces California's population growth and inflation during the same period. Analysts suggest that a liberal governor presiding over liberal supermajorities in both the State Senate and Assembly has led to the permanent establishment of more programs and the transformation of temporary spending into ongoing commitments. Each budget surplus has been utilized to expand government rather than prepare for economic downturns.
Significant funds have been allocated to address issues such as homelessness and healthcare through Medi-Cal, yet California continues to grapple with the nation's largest homeless population. Education spending has also risen, even as enrollment has decreased in many school districts. Despite increased spending and promises of improved outcomes, core challenges like homelessness, affordability, school performance, energy costs, insurance instability, and overall quality of life persist.
California's tax system is characterized as progressive and volatile, heavily reliant on revenue from stock market gains, initial public offerings, and investment income during economic booms. This revenue stream, while substantial, is susceptible to rapid market fluctuations. The concern is that ongoing programs have been funded with temporary revenue, creating a vulnerability when market conditions shift.
Critics argue that California's political climate increasingly penalizes wealth creation rather than fostering it. The possibility of implementing a wealth tax has reportedly sent a message to high-net-worth individuals and businesses, prompting some to relocate to states with more favorable tax policies. This trend, combined with a substantial increase in government expenditure, is viewed by some as unsustainable wishful thinking.
The state's fiscal trajectory under Newsom and Democratic legislative majorities has shifted the traditional American model, where free individuals, families, and communities bear primary responsibility for prosperity with government acting as a limited support. The current approach appears to favor a model where government is the central actor, with every problem necessitating new programs, subsidies, bureaucracies, and increased taxpayer demands. This approach has led to the current $356 billion budget and raised questions about the long-term sustainability of such a large and expensive government, particularly one dependent on favorable economic conditions.