Controller Malia Cohen: Despite $68 Billion Deficit, California Has Enough Cash to Pay Bills
Antonio Ray Harvey | California Black Media
Over the next few months, Californians will spend time processing the details of Governor Gavin Newsom’s 2024-2025 spending plan, which he is expected to present to the Legislature on Jan. 10 in Sacramento. However, reports of the state’s whopping $68 billion budget deficit — as projected by the nonpartisan Legislative Analyst’s Office (LAO) — have foreshadowed the Governor’s announcement with uncertainty.
Despite anticipation of deep budget cuts, State Controller Malia M. Cohen has expressed confidence that California’s fiscal cash flow is in the position to withstand any financial challenges caused by forecasted economic downturn.
“Despite reports from various sources indicating a budgetary deficit of approximately $68 billion, the state’s cash position remains strong, and, absent any unforeseen circumstances, the state has sufficient cash to pay its bills and meet its financial obligations through the end of the fiscal year,” Cohen said in a Dec. 19, 2023, letter.
Cohen is responsible for accountability and disbursement of the state’s financial resources. She has independent auditing authority over government agencies that spend state funds.
According to the LAO, the budget shortfall increased by $53 billion when compared to the projections used in the development of the current year budget – up from $15 billion when the 2023–24 Budget was signed in June. The LAO faced challenges in providing budget estimates due the IRS delaying tax filings until Nov. 16, 2023.
Regarding personal income, sales and property tax revenues, the state’s primary revenues, California entered an economic downturn in 2022 that is affecting the budget. Days before July 1, the start of a new fiscal year, Newsom and legislative leaders agreed to a state budget deal in the form of a $310 billion spending plan that provided guardrails for essential programs and mitigated what was previously a $32 billion deficit.
On Dec. 15, Senate Minority Leader Brian W. Jones (R-San Diego) and Senate Budget Vice Chair Roger Niello (R-Fair Oaks) wrote a letter to Gov. Newsom, urging him to “act early” to address the state’s worsening fiscal condition.
“This budget deficit will impact every California resident and doesn’t matter whether you’re a Republican or Democrat,” Jones stated. “That’s why we must roll up our sleeves and work together to bring spending in line with revenues.”
Cohen has been monitoring the state’s financial reports and clarified California is protected by its “rainy day reserves.” She indicated that the Newsom administration has been a step ahead in anticipating any potential financial obstacles that would disrupt the state budget.
“The state currently has more than $91.4 billion in available borrowable resources, due in large part to the Governor’s and Legislature’s foresight in building prudent rainy-day reserves in the Budget Stabilization Account,” Cohen stated.
The budget negotiations will involve new leaders of the legislature — Assembly Speaker Robert Rivas (D-Salinas) and incoming Senate President Pro tempore Mike McGuire (D-Santa Rosa).
Rivas added California Legislative Black Caucus members Assemblymember Dr. Akilah Weber (D-La Mesa and Assemblymember Corey Jackson (D-Moreno Valley) to the Assembly’s budget leadership team in December. Weber will lead Subcommittee 1 on Health while Jackson will guide Subcommittee 2 on Human Services.
In particular, the state has $24 billion in reserves to help address the budget problem. In addition, there are options to reduce spending on schools and community colleges that could address nearly $17 billion of the budget problem.
Each year, LAO publishes the fiscal outlook in anticipation of the upcoming budget season. The goal of the report is to provide the Legislature its independent estimates and analysis of the state’s financial condition as lawmakers begin planning for the 20242025-budget year.
In addition to the deficit, other takeaways in the report included “multiple tools available” the Legislature has to address the budget problem.
Cohen is also a member of numerous public financing authorities, and fiscal and financial oversight entities including the Franchise Tax Board. Cohen serves on the boards of the nation’s two largest public pension funds.
“While legislators will have difficult choices to make in the new year, I am confident they will be deliberate in addressing the budget challenges before them, and I urge them to protect, to the extent possible, the health and social service programs designed to benefit those who are displaced, without shelter, or otherwise economically disadvantaged,” Cohen stated.