Newsom Claims Climate Change Is Partly to Blame for CA’s Drastic Budget Deficit

By: Lauren | Published: May 18, 2024

There’s no doubt that the ramifications of climate change are affecting almost everyone on the planet in one way or another. But some argue that, because of its geographic location, the state of California is experiencing more severe weather side effects than almost anywhere else. 

But while California can certainly blame at least a handful of its problems on the changing climate, the Golden State Governor, Gavin Newsom, is now also attributing the state’s almost unbelievable deficit to the planet’s demise. 

Understanding State Deficit

Every state in the country works with a deficit, which means that they spend more than they have and essentially wait until the money comes in again. States make the majority of their money through taxation of both individuals and businesses, but they also receive stipends from the federal government, service charges and various other state-imposed fees. 

A faceless businesswoman using a calculator while looking over finances

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Some states, like Wyoming and Montana, have relatively low deficits, at $2.1 billion and $5.8 billion, respectively. Though most states owe somewhere between $14 billion and $30 billion. However, the state of California has an almost unbelievable deficit of $68 billion


Why Is California’s Deficit So High?

California’s deficit has always been higher than most of the other states in the country. However, it has increased exponentially over the past 25 years. In 2000, the state reported an operating deficit of only $200 million.

Piles of U.S. currency, including $100 bills, $1 bills and $5 bills

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But in 2022, the Golden State surprisingly had a $100 billion surplus for the first time in decades. However, just two years later, it has seemingly lost $168 billion. So many people are wondering: How did California’s deficit get so high? 

It’s Not California’s Fault That It's in Debt

Some say that it’s really not California’s fault, or at least not entirely, that its deficit has reached record-breaking highs. They argue that it’s the nationwide and global economy that’s led to these unprecedented numbers. 

A businessman stands facing a graphic showing the downturn of the economy

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The past few years have been rough on the stock market, which decreased the income for many Americans. Not to mention the fact that high inflation has led to a substantial decrease in spending and a generally disappointing economy. 

California Has a Spending Problem

Additionally, California’s current annual budget is more than $300 billion, the highest in the country by a long shot. And while there are some who agree that California couldn’t function with less funding, the vast majority of financial experts agree that California has a spending problem. 

Two faceless men pass a stack of U.S. cash from one hand to another

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The state funds support health and human services, education, prisons and other resident assistance programs. So, in theory, California is spending its money on its residents. However, the consensus is that they are simply shelling out too much. 

California Stands to Make a Lot of Money Through Taxation

While California is unquestionably overspending, with 30.1 million residents, the state also stands to make far more money through taxation than any other state. 

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But one of the major problems with California’s current financial predicament is that they are not making nearly as much as they thought they would through taxes this year. 


Wealthy Residents Are Leaving California

Last year, the nonpartisan Legislative Analyst Office estimated how much California would bring in through taxes in 2024, but their calculations were off by $26 billion. 

Mutibillionaire and businessman Elon Musk smiles during an interview

Source: @TED/YouTube

One factor in this egregious miscalculation is that dozens of the state’s wealthiest residents fled California last year. For example, multibillionaire Elon Musk paid several billion dollars in state taxes when he lived in California. So when he moved to Texas, California immediately lost billions of dollars in income. And he’s not the only one, as dozens of other high earners left the Golden State in what many are calling “The Great Wealth Migration.”


Gov. Gavin Newsom Let California Residents Pay Their Taxes Late This Year

Another factor that directly led to the current outrageous deficit was that California residents didn’t have to pay their taxes last year until November. Therefore, Gov. Newsom and his team were forced to create the state budget before knowing exactly what they were making. 

A calculator, pen, glasses and a post-it that reads “Tax Time” sit on top of various tax forms

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The world was incredibly surprised when Gov. Newsom gave Californians an extra six months to pay their taxes last year because of extreme weather, and while he has stood by the decision, it may have been his downfall. 


Gov. Newsom Blames Climate Change for California’s Deficit

During a press conference last week, Gov. Newsom was asked how he could explain the state’s shocking deficit. He gave a somewhat convoluted answer that included financial figures that the average resident wouldn’t understand, but in the end, he said something rather interesting. 

California Gov. Gavin Newsom looks on during a news conference about the state's efforts on the homelessness crisis

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Gov. Newsom said,  “If there was any indication that climate change has impacts well beyond those that are often promoted, I would consider our financial delays as just another example of why we need to tackle them.”


Blaming Climate Change for Overspending Is Gov. Newsom’s 'Get Out of Jail Free Card'

There are many who say that the governor’s accusation that climate change is to blame for the state’s deficit is simply his way of taking the fault off himself and his administration. The Democratic party is known for its spending, and many Republicans argue that this is a political problem more than anything else. 

Aerial view of a neighborhood in California completely submerged form flooding after a storm

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California Republican Senator Roger Niello, the vice chair of the committee that oversees the state’s budget, explained, “Republicans cautioned that this level of spending would lead to greater deficits, and it would be more prudent to show restraint. Unfortunately, the majority party ignored those warnings.”


California’s Deficit Affects Its Residents

It’s important to understand that a state’s deficit isn’t just numbers; it actually affects the daily lives of its residents. Fiscal deficits lead to increased taxes, especially for high-income earners and corporations, as well as cutbacks on spending on local infrastructure and community services. 

A map of the United States zoomed in on the state of California

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So, as prices increase in California for everyday products, homes, rent and utilities, residents of the Golden State can also expect to pay more in taxes and see less government assistance over the next few years. 


It’s Not Quite a Crisis Yet

Whether Gov. Newsom or climate change is actually to blame for California’s financial situation, it certainly seems quite dire. However, some financial experts argue that it isn’t as bad as it appears. 

A photograph of the flag of California and of the USA on a flagpole in front of a palm tree

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The state apparently still has over $37 billion in savings, and as Legislative Analyst Gabriel Petek explained, “The state remains in a good cash position. I would stop short of calling it a crisis.”