How can you nearly halve a colossal $68 billion budget deficit? Simple. With a pencil.

You simply erase the 68 and write in 38.

I’m only half funny.

Budgeting in Sacramento is basically guesswork anyway. One tax revenue calculation is essentially as valid as the other at this stage. There are still five months before a budget must be passed by the Legislature.

Gov. Gavin Newsom opted Wednesday to take a relatively rosy view of the 2024 economy by sending the Legislature a roughly $292 billion spending plan for the next fiscal year, which begins July 1.

Still, Newsom’s proposal is about $20 billion smaller than the current budget. I suspect this gap will all but disappear after the governor and legislative leaders finish negotiating the final product. The Liberal Democrats control California

stands

Capitol, after all.

Newsom’s upbeat economic outlook is in stark contrast to how the nonpartisan Legislative Analyst’s Office saw things last month. The

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office, the legislature holds a highly respected number

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Crucker issued a much more pessimistic forecast. It implied the risk of a recession and calculated the budget deficit at $68 billion.

We’re just a little more optimistic, the governor said as he unveiled his budget proposal to reporters. We don’t see a recession.

As is his wont, Newsom had a remarkable memory bank for numbers, reciting data non-stop for nearly two hours.

At least for now, California taxpayers and primary users of state services will benefit from Newsom’s confidence in a recovering economy. It means that there will be no serious pressure to increase taxes. There will also be no major cuts in education and health care.

The cuts could become more severe later if Newsom’s revenue projections are off base.

But virtually no politician wants to raise taxes in an election year, or any year for a governor who dreams of one day sitting in the Oval Office and appears to be gearing up for a 2028 presidential race.

The governor could not have been clearer about the fact that he has no interest in a broad-based tax increase.

Why on earth do you keep writing about that? he asked reporters, referring to speculation about tax increases and taking particular aim at editorial pages of the Wall Street Journal. The state pays a price for misrepresentations and lies.

When a reporter later asked if he didn’t want a big tax increase, the frustrated governor replied: I’m just not going to say it again. I say it every year.

So, how does Newsom propose to balance the books?

To start, the governor is taking $30 billion from the state

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The Legislative Analyst’s Office deficit forecast. He assumes the economy will generate $15 billion more in tax revenue than legislative analyst Gabriel Petek. And he estimates that the amount of state school aid needed is $10 billion less than what the government needs

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office calculates.

After that, Newsom will tap $13 billion in reserves.

He makes $8.5 billion in cuts, mainly in climate reduction and housing programs.

There is a narrowly targeted tax paid by managed care organizations that serve Medi-Cal recipients. It would raise almost $4 billion.

He wants to delay spending on $5 billion worth of items such as public transit and intercity transit.

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provider rates for serving people with developmental disabilities, preschool programs, and clean energy investments.

General fund spending worth $3.4 billion would be shifted to other funds, such as the cap-and-trade program that pays for climate programs.

There’s also $2 billion in accounting tricks. An example: Pay state employees on July 1 instead of June 30 so that expenses can be counted in the next fiscal year.

How did the state end up in this red ink hole after running a $100 billion budget surplus just 18 months ago?

One short-term reason is that the federal government last year extended the normal tax filing deadline from April to November to make life easier for Californians hit by record winter storms. That meant Newsom and lawmakers didn’t know how much tax revenue to expect before passing the current budget in June. So they took the easy way out and overestimated tax collections.

We had a blindfold on, Newsom said. If they had been able to see it clearly, he claimed, spending would have been adjusted downward.

Maybe. But their natural inclination was to spend more, not less.

The bigger long-term problem is that Sacramento continually faces a roller-coaster tax system that responds erratically to good and bad times. It’s either a boom or bust for the treasury. But the politicians do not have the will or the courage to solve the problem.

The top 1% of earners pay nearly 50% of the state income tax, which provides two-thirds of Sacramento’s revenue. Their capital gains fuel the vault in a robust economy, but are reduced to a trickle when investment returns are weak.

A long-sought reform that has never gained traction is broadening the tax base: lowering California’s top income tax rate from 13.3% and expanding the sales tax to include services such as legal and accounting services.

Asked about that Wednesday, Newsom said: It’s the art of the possible. And reforms seem politically impossible.

Either way, Newsom said, he prefers to preserve California’s highly progressive income tax system and simply save more money in good times to use in bad times. He wants to amend the law to make higher savings possible.

This is Newsom’s opening salvo in budget negotiations with legislative leaders.

It’s a good bet that even the governors’ minimal cuts will be relaxed and spending increased. The Liberal Democrats own the place.