His letter was written just before the California Citizens Compensation Commission voted to increase the salaries of all elected officials in the state by 3.5% in June.

“First, I want to express my utmost respect for the independence and the important work of this commission,” Newsom wrote. “Your dedication to ensuring fair and appropriate compensation for public officials is important to the functioning of our state government.”

“While the Commission deliberates a proposed 3.5% salary increase, I feel it is important to acknowledge the fiscal challenges currently facing our state. In light of these circumstances, I have decided to personally waive any potential salary increase related to my state service for the time being,” wrote Newsom.

If the salary increase was going to go through, this would have increased Newsom’s salary to around $242,294 by December of this year.

“Newsom saving the state $7,000 isn’t a lot,” said Lee Greenman, an accountant who helps cities and regional bodies with budget problems. “But this goes way beyond money matters. Him taking a pay raise when the state is tens of billions in the red? That doesn’t look great.”

The final deal on the budget ended up having an estimated $46.8 billion deficit, a large increase over the 2023 budget which ended up being around $32 billion.

According to the California Budget and Policy Center, much of this shortfall is attributed to declining tax revenues that started in the 2022 tax year.

“No other state in American history has ever experienced a surplus as large as this,” Newsom said as he unveiled the spending plan for the 2022-2023 state budget.

According to CalMatters, income tax accounts for more than 75% of the state’s general fund revenue.

In California, Newsom had shuttered the state’s economy to protect against the pandemic, resulting in around 2 million jobs instantly disappearing. It’s obvious that when restrictions were lifted some of the jobs would come back, but the government had counted on continued growth.

Newsom’s new budget cut of $6.7 billion was reserved to increase the wages of healthcare providers. The state is now using that money to plug the state deficit. Healthcare providers agreed to be taxed in order to generate money that would be reinvested back into Medi-Cal, the state’s insurance program for lower-income households.

Health insurance plans serving Medi-Cal patients would be taxed so that the state would claim a dollar-for-dollar match in federal money. This would have generated upward of $35 billion that the state would have invested into healthcare workers’ reimbursement rates.

Jarrod DePriest, president of Maxim Healthcare Services, said between 2018 and 2024, the number of nurses employed under his company dropped by half. He said this is because the reimbursement rates have not kept up with salaries and inflation. Now, his company receives almost 10,000 fewer patients.

Dustin Corcoran, president of the California Medical Association, said providers will only accept more Medi-Cal patients if they feel the state can fund the program permanently. Corcoran said providers need to avoid “choosing between bankruptcy and patient abandonment. That shouldn’t be a choice a provider ever has to make.”

Democratic leaders in Sacramento are pushing for drastic cuts in prison spending. This has been a long-term goal of the California state government. With the enormous budget deficit, Democratic leaders may be able to put more pressure on Newsom to make the cuts.

Democratic lawmakers argue that the $14.5 billion budget of the California Department of Corrections and Rehabilitation is overinflated. The government agency estimates there will be nearly 15,000 empty beds in the next fiscal year.

“He kept his salary the same while other state employees took 8-10% cuts to help others keep their jobs during COVID. Gimme a break,” said an X user.

“Why should a millionaire be taking a salary at all to do public service?” wrote X user Zachary Murray.

“If he really wants to help, he should go talk to Elon and try to keep all those Space X Jobs in California he lost,” said X user Carlos Magana.

“It does look like a strong stance from a financial perspective. But on the other hand, he knows how much a raise would hurt him politically. But he does also have a step up against lawmakers and others who have said nothing of the raise yet,” said Greenman.

Newsom used budget reserves during the pandemic, which are intended to cushion the blow of lulls in income tax. Now, critics are warning against misusing the reserves this year to plug the deficit. This is because draining the reserves now could leave Californians stranded in the event of a recession.

Over the years, the state government has created budget reserves to protect the budget from downfalls in revenue. Earlier this month, there was a debate at an Assembly Budget Committee hearing over whether the state should expand its rainy day funds.

Others have criticized this idea as they believe the state needs to increase spending to support low-income Californians. Scott Graves of the California Budget and Policy Center said raising the cap for reserves could “leave less revenue to meet the immediate needs of Californians.”

However, what needs work is California’s progressive tax structure. What is clear is the boom-and-bust cycle that California goes through due to the volatility of tax revenues. While California is better equipped to handle this deficit than during the Great Recession (when it had no reserves) the state’s financial well-being currently fluctuates with the stock market.