Despite surplus, analyst warns of California 'fiscal cliff'

SACRAMENTO, Calif. (AP) — Despite announcing a record-smashing budget surplus of nearly $100 billion on Friday, California Gov. Gavin Newsom's plan to spend that money would likely push the state toward a “fiscal cliff” next year that could require billions of dollars in budget cuts, a state analyst said Monday.

Newsom's latest budget proposal, known as the “May Revision,” would leave the state $3.4 billion over a constitutional limit on spending this year and more than $20 billion over the limit next year, according to an analysis by the nonpartisan Legislative Analyst's Office.

“The Governor's May Revision does not have a plan to address this roughly $25 billion requirement,” the Legislative Analyst's Office wrote in a report released Monday. “As a result, the state would very likely face a significant budget problem next year, which could require reductions to programs.”

Newsom boasted during a news conference on Friday that his spending plan would leave the state with $37.1 billion in reserves. But the LAO notes nearly $10 billion of that money is in a special public education account that can't be used to help solve budget problems. The state's primary savings account would have about $23.5 billion in it, or less than the $25 billion requirement projected by the LAO.

The LAO “strongly” urged lawmakers to put more money into savings than Newsom had suggested. They also recommended rejecting some of his budget proposals to keep the state beneath the spending limit this year.

The Newsom administration believes the governor's budget proposal “well positions” the state to withstand that potential crisis, according to H.D. Palmer, spokesman for the California Department of Finance. In addition to the billions of dollars in reserve, Newsom's budget proposal would spend...