Gov. Gavin Newsom’s Administration Orders California Spending Freeze
Capital flight is real. There isn’t enough wealth coming from the wealthy any longer.
Legal Insurrection readers may recall that I reported on California’s staggering $68 billion deficit, caused by an “unexpected” economic downturn.
What is truly unexpected is that Gov. Gavin Newsom’s administration has just ordered a state spending freeze.
In a memo sent across California agencies and departments this week, the director of the Department of Finance wrote, “It is vitally important that state government is efficient, effective, and only expends funds that are necessary to the critical operation and security of the state. As such, all state entities must take immediate action to reduce expenditures and identify all operational savings achieved.”
The department urged state agencies to take several steps to save money, including avoiding any new contracts or agreements to lease or purchase equipment and cancel all plans for non-essential travel to seminars, conferences or training. It also urged departments to halt the purchase of new technology, non-essential state vehicle replacements and to reevaluate expensive IT projects.
H.D. Palmer, a spokesman for the Department of Finance, said the last time the administration made this kind of directive was at the beginning of the pandemic in the spring of 2020 when state revenues plunged.
Palmer said the message to state agencies is simple: “We know you have an authorized budget, but if you haven’t spent the money on things you don’t need right away, don’t do it.”
The shortfall is likely to impact the 2024/25 budget, too.
California, the nation’s most populous state with the fifth-largest economy in the world, is now facing the biggest budget deficit in state history.
Starting next month, California will begin its budget process when Newsom releases his proposed 2024-25 budget, followed by a revision in May. California’s legislature and Newsom will need to take into account the state’s multibillion-dollar budget deficit before the former approves the budget for the fiscal year that starts July 1.
Capital flight is a large-scale exodus of financial assets and capital from a nation due to events such as political or economic instability, currency devaluation, or the imposition of capital controls. California shows capital flight is real. There isn’t enough wealth coming from the wealthy any longer.
The deficit for the fiscal year that begins in July is tied to the waning fortunes of California’s wealthiest taxpayers, who pay the bulk of personal income levies, the state’s largest revenue source. The shortfall is forcing the government to consider cuts to key services, including schools, and to weigh tapping budget reserves.
“Issuing this letter now gives us a head start on the budget process by using the governor’s executive authority to get agencies to cut back on nonessential spending,” said H.D. Palmer, a spokesman for the state finance department. “We have roughly seven months left in the fiscal year, so by taking this step now and by getting ahead of the process, we can achieve cost savings that will contribute to closing the budget gap.”
California politicians can be blamed for fueling capital flight.
A story in 3 panels. #Capitalism #CaliforniaVSTexas pic.twitter.com/xCrYCF2eto
— Leslie Eastman ☥ (@Mutnodjmet) October 8, 2021
Of course, the move could also be a bit of strategy on Newsom’s part.
Gavin Newsom's ordered a California state spending freeze as he braces for a HUGE impending budget issue.
It's just his latest attempt to cast himself as a moderate for his "shadow" presidential campaign. pic.twitter.com/IZJdajEBmc
— Deplorable Jaz McKay 🇱🇷 🇮🇱 (@DeplorableJaz) December 14, 2023
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Comments
This just in:
Hell has frozen over.
You don’t actually believe any of that do you?
Jan 1 all illegal aliens will receive free health insurance called Medi-Cal.
What about all that free money for minorities and deportable?
Oh, that will continue. California can’t stop spending money on illegals, especially welfare, medical, and housing.
Their problem will be solved quickly by simply stating that sanctuary cities must pay for illegals out of their own city/county taxes, not from state funds.
Sanctuary cities would shut down immediately, and the grifters will drift to some other place. Perhaps Chicago or New York will take them.
They have loads of cash to spend on illegal invaders.
Bwaahaahaaa! You mean all that exorbitant taxation isn’t pulling in the discretionary funds for the state government?
Paging Dr. Laffer….
I bet that his buddy, President Xi, would lend him some money.
Perhaps they can discuss a belt and road project with lots of strings attached.
I bet that his buddy, President Xi, would lend him some money.
How can Governor Newson be so heartless as to call for a spending freeze at a time when the needs of the poor are so great. A better solution is to increase taxes on “the rich”, i.e., people who have jobs.
How about they tax the rich at about 85%? No one needs more than 15% of their earnings, similar to gun owners don’t need more than 10 magazines in their chamber.
/s
Top 1% = 50% of taxes
Top 0.1% = 30% of taxes
A few thousand families in the state keep the lights on at this level. They leave and the light go out. Tax rates go up 1% more in 2024. Most wage earners will see a 10.3% income tax.
Governor Newson believes his policies are saving the planet from climate change, saving his democracy from Trump, and providing a safe sanctuary for illegal aliens from every terrorist country around the world.
Newscum turned CA into sanctuary state for: illegal aliens, homeless junkies, black looters, trans groomers. Did I forget anybody?
It’s official, he’s running.
What? To bankrupt the US and not just California?
😉
If the Federal gov’t spent at 2017 levels we would have close to a balanced budget. Instead the feds taking in $4 trillion but spending $6 trillion. Adding another $2 trillion to our existing $32 trillion debt isn’t exactly prudent.
Then there’s the impact of increased interest rates. The fed gov’t must refinance about 1/3 ish of the total federal debt at much higher rates this year. Even before that occurs we will spend about $1 trillion of our $6 trillion budget on debt service, which is more that we spend on the entire defense budget.
What I can’t understand is if the US Armed Forces are at manning levels (yes, I said MANNING) below the personnel prior to WWII, perhaps we need to reduce the DoD budget to pre-WWII levels.
That would save loads of money and get the attention of the
politicians in uniformslack ass generals.This is a bit of snark, because I know that defense costs are mire due to present day armament and equipment, but personnel costs are exceptionally high.
All volunteer force with high % of married w children. Add the growing need for more intelligent Soldiers who can use the more complex equipment as well as.the need for the ‘Strategic Corporal’.
Some 20 year old E4/Corporal leading his fire team has to be able to understand and implement the commanders intent. He has to use initiative and make decisions at the tip of the spear far from any oversight, sometimes with huge potential consequences politically that could impact policy if he gets it wrong.
Constant state of train/deploy/military school/promote/train/deploy leaves little time for families. The services have to offset those things with higher pay. In addition they cut back the 20 year retirement. Now there’s a blended plan of 403B and with a reduced defined benefit at 20 years.
IMO the all volunteer force is gonna fail. We gonna have to have a draft within a decade b/c not enough folks will join and a higher % of those who do join won’t be retained past their first enlistment. Instead they will join, gain skills, experience, maturity, then take themselves to the civilian sector and use their GI bill.
It is good to have something to chuckle about over the weekend.
Subotai Bahadur
Recall that a year or so ago California had a surplus. The state spent it all. Might have been better to hang on to some of that for a rainy day, but we’re dealing with grasshoppers, not ants…
Don’t be freezing dem reparations.
Amazingly, that was the first office to close.
LOL
quoteIt also urged departments to halt the purchase of new technology, non-essential state vehicle replacements and to reevaluate expensive IT projects unquote
if the old stuff works .. keep it running…
the federal govt needs to do this as well ….
I remember well … if we don’t spend it … we won’t get it next year.
So they’re gonna keep the old vehicles running a little bit longer… but they also have a bluesky legislative mandate to convert to EVs, don’t they?
Oh dear.
I wanna know why there is any non=essential spending at all.
So much for the recommendations from the California reparations committee.
Full-automatic weapons for California state revenue agents in three… two…
Does this mean high speed rail project won’t be funded?!
It will be funded, because the funding lines the pockets of family members and cronies of CA state politicians. That’s why no matter how much money is thrown at the project, nothing ever gets done, they keep going over and raising the budget, and the project completion date remains a carrot on a stick.
Shades of the Massachusetts Turnpike, which was supposed to be a toll road only until its construction costs were paid off. When that got close to being accomplished, suddenly the turnpike needed wholesale resurfacing, which… had to be funded somehow. And that’s been the pattern for almost 70 years.
SF did the same with the Golden Gate bridge. Tolls were only supposed to be charged until the debt to build it was paid off, so they refinance it to keep the tolls running forever. I’m not sure how that accords with the original toll plan as worded, because the original debt was indeed paid off. Refinancing it is new debt which, if they cared about obeying the law, wouldn’t allow for keeping the toll booths.
CA high speed boondoggle, bullet train to nowhere, billions disappearing into black hole in sacramento.
Q: What does this mean to professional athletes who, like Shohei Ohtani, are under contract with teams located in California?
A: Gov. Brylcreem and the California Department of Finance are coming after you!
Q: What should these athletes be talking to their tax attornies about this morning?
1) Establish a primary residence in a state other than California, preferably in low-tax states like Florida or Tennessee.
2) Deferring the majority of one’s MLB, NFL, NBA, PGA, etc., compensation to the end of the contract. Live off your endorsements.
Its worse than that.
Even you play for team in different state, all the money you got paid while you were playing that one game in CA as visiting team will be taxed as CA income.
Indeed. NY does this also. I haven’t heard of any states who do this other than those two.
The Gov strangled the golden goose.
In other news, Ashley Biden, President Biden’s daughter, owes $5,000 in income taxes beginning in 2015, according to a recent tax lien docket filed in Philadelphia and obtained by Fox News.
I wonder how many of the 87,000 new IRS agents will target the Biden family? It’s quite obvious those family members don’t think they need to pay their fair share of taxes while the rest of us are to be scrutinized to the fullest extent of the law.
https://nypost.com/2023/12/18/news/bidens-daughter-ashley-owes-thousands-in-income-taxes-lien-documents-show/
$5k could be fill in the blank tax error? Blame tax accountant and fire them, and pay the penalty with interest. That’s totally different from Hunter case.
There’s always a lucrative book deal waiting for Ashley, should she choose to write it.
CA public sector pension plan is unfunded ticking time bomb. As boomers age out, with shrinking population it goes BOOM.