California Experiencing Fiscal Horror Story

New Pew study examines financial health of the 50 states.  

By Andrew Moran | May 31, 2024 @ Liberty Nation News, Tags: Articles, Business News, Good Reads, Opinion

Gavin Newsom (Photo by Chip Somodevilla/Getty Images)

Despite possessing one of the world’s largest economies, the Golden State is the lead character in a fiscal horror story. California’s debt is about $1.6 trillion, the annual budget deficit is projected to be as high as $70 billion in the coming years, and lawmakers are tapping into the rainy-day fund to maintain the basics. This is Newsomonics in Newsom Nation. A new study highlights how bad the situation is in sunny California.

The Fiscal State of California and Others

The Pew Charitable Trusts’ Fiscal 50 project analyzed state tax revenue trends in the second quarter of 2023, concluding that 32 states outperformed their 15-year trends and 18 states reported falling tax revenues. Researchers say that the data, adjusted for inflation and seasonality, offers state leaders “a deeper understanding of long-term trends” and determine “whether their budgets are on a sustainable path and allow for better-informed fiscal planning and policy formulation.”

Alaska topped the charts, collecting 1,041% more than its long-term trend. This was followed by Wyoming (37.7%), New Mexico (32.5%), West Virginia (10.6%), and Montana (10%). Florida and Texas also outperformed their long-term trajectory thanks to their notably “strong” collections. On the other end of the fiscal spectrum, California suffered the weakest tax revenues, sliding 16.2% compared to the 15-year trend. This was followed by Minnesota (negative 4.9%), New York (negative 4.8%), and Connecticut (negative 4%).

Overall, total state tax revenue growth was $4.2 billion, 1.2% below the 15-year trend. Here is the most damning part of the report’s findings: “For the first time since 2000, no state had fewer than a month’s worth of operating funds in its total balances. Between fiscal years 2007 and 2021, 8 states ran long-term deficits, carrying forward costs of past services and government operations.”

The results were unsurprising. Alaska is awash in energy. Florida and Texas keep attracting businesses and families. New York is gradually becoming a strange concoction of Escape From New York, Mad Max, and Soylent Green. California decays by the day through vacuous public policy pursuits and a population exodus. As Liberty Nation has reported over the years, the fiscal snapshot of state and local finances is deteriorating through overpromising and underdelivering.

In the case of California, officials are entertaining various ideas to stop the bleeding.

‘Democracy Is on the Ballot’

Gov. Gavin Newsom (D) has contemplated a plethora of prescriptions for his state’s fiscal illness. With tens of thousands of folks waving goodbye yearly, desperate times apparently call for desperate measures.

The governor, considered a presidential candidate for 2028, called for a windfall tax on energy titans because “greedy oil companies fleece Californians.” In January 2023, the legislature proposed imposing a wealth tax, with the kicker being that it would also apply to residents who flee the state and relocate to another jurisdiction. Because more people are driving electric vehicles in California, officials are also thinking about transitioning away from a gasoline tax to a mileage levy, a concept that experts say would penalize EV drivers more than conventional motorists.

The newest endeavor attempts to prohibit voters from approving new taxes. Democrats contend that citizens lack the knowledge to understand taxation complexities and therefore should not be granted decision-making power. “The state Democrats are apoplectic over the prospect of citizen control over revenue and taxes,” opined legal scholar Jonathan Turley. “What was a quaint element of democratic empowerment is now challenging a core vehicle of Democratic power.”

As Bad as Uncle Sam

Washington’s finances are worsening, but politicians on either side of the aisle do not seem to have any plan to halt the country’s fiscal demise. Instead, lawmakers want to double down by spending, printing, borrowing, and taxing more than they already do. The annual Festivus report, courtesy of Sen. Rand Paul (R-KY), offers insight into how much the nation’s capital wastes the $5 to $6 trillion in annual revenues.

But it is just as bad at the state and local level. Nearly every day, local news reports on state or city lawmakers demanding new taxes, fees, surcharges, and other dubious methods to confiscate wealth. What is comical is that these levies usually fail, as in the hilarious case of Philadelphia’s soda taxes: Sales of sugary beverages declined, prices rose, and the majority of the funds dedicated to education were allocated to the city’s general coffers. In Illinois, legislators want higher taxes to give themselves a raise. New York maintains a remote work tax that forces workers to pay income tax if their employers are situated in the Empire State.

Is it any wonder why states are enduring fiscal challenges?

 

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