Governor-elect Becerra must quickly confront state budget mess Newsom left behind

The most fundamental — and arguably most important — duty of a California governor is managing the state budget.

Xavier Becerra, the former attorney general who won the governorship Tuesday, must submit a new budget to the Legislature just days after his inauguration in January. Outgoing Gov. Gavin Newsom is leaving him with a fiscal mess.

Newsom, who will likely launch a presidential campaign, insisted in June that the 2026-27 budget he signed was not only balanced but would remain so during his predecessor’s first year.

Not by a long shot.

During Newsom’s second term, he and the Legislature routinely enacted general fund budgets that spent billions of dollars more than the state’s tax system was producing, covering the gaps with accounting gimmicks, by draining emergency reserves and incurring on- and off-the-books loans.

A chart in the back pages of the 2026-27 budget reveals that during Newsom’s eight years of managing the budget, the state took in $1.4 trillion in general fund revenue but spent $1.7 trillion, averaging $37 billion in overspending each year. Among other things, the spending spree increased the state’s payroll by 100,000 positions.

Newsom leaves the state with what Gabe Petek, the Legislature’s budget analyst, describes as a $29 billion “wall of debt” that must eventually be repaid, echoing a term that former Gov. Jerry Brown coined in 2010.

Becerra faces a stark choice.

He could continue the deficit spending, running up even more debt — the governmental equivalent of a family maxing out its credit cards to finance its lifestyle. Or he could do what Brown did when he began his second governorship and faced a $35 billion “a wall of debt” from the effects of the Great Recession.

After his 2010 election, Brown engaged in a very public discussion about what it would take to balance the budget and whittle down its debts. He settled on a mixture of spending reductions and temporary sales and income tax increases, plus creating “rainy day” reserves to cushion future revenue drops.

During Brown’s governorship, general fund income and outgo closely matched, the aforementioned chart confirms. He bequeathed a healthy budget to Newsom.

It would take political courage for Becerra to adopt the face-the-music attitude that Brown displayed in 2011. Politically, the easier path would be to emulate Newsom, who was content to overspend revenues while shunning any major tax increases to cover the gaps.

Becerra has been very reluctant to reveal any policy intentions, but in an interview late last month, he indicated that he may be willing to increase taxes — unlike Newsom.

Becerra told Ashley Zavala, of Sacramento’s KCRA-TV, that he’s interested in raising taxes on high-income Californians, taxing employers whose low-paid workers qualify for Medi-Cal health benefits, closing corporate tax loopholes and adopting a mileage-based tax on electric cars.

Although Becerra opposed Proposition 40, the billionaire wealth tax on Tuesday’s ballot, he told Zavala that increasing taxes on high-income Californians would hinge on “if we can prove that you’re not paying your fair share,” adding “to me, that’s pretty basic. 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.”

Under legislation passed this year, the state is already exploring taxation of employers whose workers qualify for Medi-Cal, but it and the other taxes Becerra mentions would be a hard sell.

Overall, Californians already have one of the nation’s highest tax burdens, which is a factor in the state’s recent losses of population and corporate headquarters. Increases probably would have to be paired with spending cuts to make them palatable, and those reductions would face opposition as well.

Nobody ever said governing California is easy.