Xavier Becerra’s victory in Tuesday’s gubernatorial race came with a prize few incoming governors would envy: a state budget in considerably worse shape than outgoing Gov. Gavin Newsom has publicly acknowledged.
The former California attorney general will be sworn in come January, and almost immediately he’ll have to submit his own budget proposal to the Legislature. Whatever fiscal honeymoon he might have hoped for is likely to be short-lived, given the financial picture Newsom is leaving behind as he turns his attention to a probable presidential run.
Back in June, Newsom declared that the 2026-27 budget he signed was balanced and would stay that way through his successor’s first year in office. That claim hasn’t held up well under scrutiny.
Throughout Newsom’s second term, state budgets consistently spent more than California’s tax revenues could support, with the gaps papered over through a mix of accounting maneuvers, depleted reserve funds, and various loans — some visible in the budget documents, others less so. A chart buried in the back pages of the 2026-27 budget tells the story plainly: over Newsom’s eight years in office, the state collected $1.4 trillion in general fund revenue but spent $1.7 trillion, an average overspend of roughly $37 billion annually. That spending also helped grow the state workforce by about 100,000 positions.
The result, according to Legislative Analyst Gabe Petek, is a $29 billion “wall of debt” — a phrase first used by former Gov. Jerry Brown back in 2010 to describe a similar predicament — that will eventually have to be paid down.
Becerra now has a decision to make. He can follow Newsom’s lead and continue borrowing against the future, essentially running the state’s finances the way an overextended household might rely on credit cards to maintain its lifestyle. Or he can take a page from Brown’s playbook from his second stint as governor, when he confronted a $35 billion debt hole left by the Great Recession.
Brown chose transparency and tough choices. He laid out publicly what it would take to balance the books, ultimately combining spending cuts with temporary increases to sales and income taxes, while also establishing rainy-day reserves to guard against future downturns. The budget numbers back him up — during his tenure, state revenue and spending tracked closely together, and he handed Newsom a budget in solid shape.
Following Brown’s example would require real political nerve from Becerra. The far easier route, the one Newsom took, would be to keep spending beyond the state’s means while avoiding any serious tax hikes to close the gap.
So far, Becerra has kept his cards close to his chest on policy specifics. But in an interview late last month with Sacramento’s KCRA-TV, he hinted he may be more open to raising taxes than his predecessor. Speaking with reporter Ashley Zavala, Becerra floated several possibilities: higher taxes on wealthy Californians, a levy on employers whose low-wage workers rely on Medi-Cal, closing corporate tax loopholes, and a mileage-based tax for electric vehicle owners.
Notably, Becerra opposed Proposition 40, the billionaire wealth tax that appeared on Tuesday’s ballot. Still, he told Zavala he’d consider taxing high earners more if it could be shown they aren’t paying their fair share. “If you’re a billionaire and you’re paying at a lower tax rate than a firefighter or a teacher or a nurse, you’re not paying your fair share,” he said, calling the principle “pretty basic.”
The state has already begun exploring a tax on employers tied to Medi-Cal usage under legislation passed this year, but that and the other ideas Becerra raised would face steep political resistance.
California already ranks among the states with the heaviest overall tax burdens, a reality that’s contributed to the exodus of residents and corporate headquarters in recent years. Any new tax increases would likely need to be paired with spending reductions to gain traction — and those cuts would almost certainly draw their own backlash.
Governing California, as always, is no simple task.
Original source: CalMatters
