California has more money than projected after admin miscalculated state budget

California has more money than projected after Gov. Newsom's administration miscalculated the state budget this year

California's government likely has more money to work with this upcoming year after Gov. Newsom's administration made two accounting errors when it put together his proposed state budget in January, according to a memo leaked to KCRA 3 on Friday.

The accounting errors were related to the state's retirement system known as CalPERS totaling $2 billion. Gov. Newsom in January projected the state would have to grapple with a $2.9 billion shortfall. The confirmed miscalculation means that shortfall could be much smaller.

California's legislative leaders have known for months but did not make the issue public.

Gabe Petek, who leads the state legislature's Legislative Analyst's Office, confirmed the accounting mistakes to KCRA 3 on Friday. Democratic leaders kept the $2 billion accounting mistake under wraps after Petek's office flagged the issue in a memo to state lawmakers in February.

The memo stated Gov. Newsom's administration made two errors. The first involved double counting CalPERS contribution rates for the upcoming year, which the LAO said was a $1.6 billion miscalculation. The second issue involved incorrect contribution rates when the administration calculated how much money the state would need to contribute to CalPERS in the years ahead. The LAO stated that mistake amounts to about $450 million.

"Given the size and complexity of California’s budget, it is not uncommon that we come across errors stemming from calculation mistakes or formula errors etc," Petek said in an email to KCRA 3 on Friday. "Indeed, part of the role of our office is to serve as a check on the administration’s budget calculations. So, in the case of this CalPERS example, you are correct, we did identify a double-counting error and given that this error is on the larger side, we notified the Legislature of it for their situational awareness."

"In the broader context of the state budget with a lot of moving numbers, and the coming updates to the revenue forecasts, we expect the issue will be corrected in the May Revision," Petek said.

It was not clear as of Friday why state lawmakers and the Newsom administration didn't tell the public about the $2 billion error. State lawmakers have been having numerous hearings on the state budget since the beginning of the year.

Newsom's administration on Friday denied that it's an error.

"This isn’t a calculation error – it’s revision to better estimate how these payments are made," said H.D. Palmer, a spokesman for Newsom's Department of Finance. "We told legislative leaders and the LAO back in February that we would update how we estimate these payments once this issue was identified. We’ve already made that adjustment, and it will be reflected in the revised budget next month."

"This administration continues its track record of lacking transparency, preferring to keep the legislature and the public in the dark to avoid having to justify cuts while spending millions on their pet projects," said Assemblyman David Tangipa, R-Fresno, who is the vice chairman of the Assembly's Budget Committee.

KCRA 3 reached out to Democratic legislative leaders and lawmakers who lead the budget committees in the Assembly and State Senate and asked why they did not notify the public about the miscalculation.

"These are tracked in January and May budget revisions from the administration. This is standard practice," said Jason Sisney, the state budget advisor for Assembly Speaker Robert Rivas.

When asked to clarify if it is standard practice to not let people know when billions are miscalculated, Sisney repeated his statement.

A spokesperson for the leader of the Senate's Budget Committee, State Sen. John Laird, D-Santa Cruz, referred KCRA 3 to the Legislative Analyst's Office and Newsom's Department of Finance for Comment.

Negotiations on the state spending plan are set to ramp up next month after Gov. Newsom presents his final proposed budget in May.

State lawmakers have been preparing to deal with a significant budget shortfall this upcoming year, and even larger deficits in the years to come.

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