For years, California budgets have been sold to the public as exercises in prudence and compassion. Balanced. Responsible. Forward-looking. That narrative no longer holds. Governor Gavin Newsom is preparing to release what will likely be his final budget, with far fewer options than he once had. The consequences of his choices will not fall on him. They will land squarely on the next governor, the next Legislature, and local governments across the state.
The most important number in this debate is not the headline deficit of $18 billion. It is the $21 billion in internal borrowing quietly stacked up to make budgets appear balanced on paper.
The Rainy Day Fund is down to roughly $14 billion. Internal borrowing has climbed to $21 billion. And California now stands alone as the only state still owing nearly $20 billion in pandemic-era unemployment debt to the federal government.
These numbers matter because they highlight the narrow box the next administration will be forced to operate in.
Over the past several years, the Newsom Administration has relied on internal borrowing to sustain ongoing spending while postponing the bill.
Borrowing $7 billion this past year, on top of $2.1 billion the year before, papered over deficits today by guaranteeing pain tomorrow.
The Legislative Analyst’s Office warns that the current $18 billion deficit could grow to $35 billion annually if structural fixes are not made. When that happens, local governments will be asked to do more with less. Police and fire departments will face hiring freezes. Road maintenance will be deferred. Infrastructure projects will stall. And expect fees and costs to rise.
California has been here before. During the Great Recession, internal borrowing created a “Wall of Debt” so large it took years of discipline to dismantle. That discipline is now gone. The wall is being rebuilt, loan by loan, while Sacramento congratulates itself for meeting technical budget requirements.
The question facing Californians is simple. Will this latest budget leave $21 billion in internal debt untouched once again? Will this administration leave office, having exhausted the state’s borrowing capacity and handing a maxed-out credit card to the next Governor?
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Hector Barajas is the founder of Amplify360 Inc., a strategic communications and public affairs firm based in Sacramento and Los Angeles. Amplify360 helps organizations shape narratives, influence public opinion, and navigate complex public policy environments through media relations, coalition building, and integrated communications strategies. The firm works with clients facing high-stakes legislative, regulatory, and reputational challenges across local, state, and federal arenas.
X: @HectorMBarajas
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