California Governor Gavin Newsom has signed a budget aimed at addressing a significant $46.8 billion deficit. The budget, which includes $16 billion in spending cuts and temporary tax increases on some businesses, was passed by lawmakers following an agreement between Newsom and legislative leaders. This marks the second consecutive year that California has had to scale back or delay some progressive policies that were previously supported by record-breaking surpluses during the COVID-19 pandemic.
“This is a responsible budget that prepares for the future while investing in foundational programs that benefit millions of Californians every day,” Newsom said in a statement. “Thanks to careful stewardship of the budget over the past few years, we’re able to meet this moment while protecting our progress on housing, homelessness, education, health care, and other priorities that matter deeply to Californians.”
The deficit, which was about $32 billion in 2023, has grown larger this year, with more deficits projected for the future. This comes just two years after Newsom and Democratic lawmakers were celebrating surpluses exceeding $100 billion, largely due to federal COVID-19 aid and a progressive tax code that generated significant revenue from the state’s wealthiest residents. However, those revenue spikes did not last as inflation slowed the economy, leading to rising unemployment and a slowdown in the tech industry, which has been a major driver of the state’s growth.
The Newsom administration also miscalculated the state’s revenue last year after a seven-month delay in the tax filing deadline. California has historically experienced large budget swings due to its reliance on its wealthiest taxpayers. These deficits have come at a challenging time for Newsom, who has been building his national profile ahead of a potential future presidential run and has been tapped as a top surrogate for President Joe Biden’s campaign.
The budget includes an agreement that Newsom and lawmakers will attempt to change the state constitution to allow California to put more money in reserve for future shortfalls. However, Republicans have criticized the tax increase on businesses, which applies to companies with at least $1 million in revenue and will last for three years, generating more than $5 billion in extra revenue for the state next year. They also criticized Democrats for some cuts to social safety net programs.
Newsom’s plan to balance the budget includes a nearly 10% cut for nearly all state departments, including eliminating thousands of vacant state worker positions. Many previous promises have been paused or delayed. For instance, a pledge to help pay child care expenses for an additional 200,000 families by 2026 has been delayed to 2028, contingent on available funds. Similarly, a promise to increase the pay for workers who help people with developmental disabilities find jobs has been delayed by six months, costing advocates roughly $500 million in lost revenue. Additionally, a promise made last year to increase the minimum wage for health care workers this summer has been delayed until January at the latest.
Despite these delays, some major expansions have been protected. These include making all low-income adults eligible for government-funded health insurance regardless of their immigration status and making school lunches free for all students. “In California, you don’t have to be profligate to be progressive,” Newsom said during his State of the State address. “We understand how to balance budgets while protecting working families, children, and the most vulnerable people in this state.”
Republicans have expressed frustration over being left out of budget negotiations. “We are seeing what I can only characterize as heartless cuts for those that are hurting the most. We can do a whole lot better than this,” said Republican Assemblymember Jim Patterson.
The budget represents a compromise between Newsom and legislative leaders, with both sides achieving some victories and making concessions. The Legislature agreed to loan Pacific Gas & Electric $400 million as part of a plan to extend the life of the state’s only remaining nuclear power plant. In return, Newsom agreed to abandon some of his most controversial cuts to social services programs, including agreeing to pay for people to care for some disabled immigrants who are on Medicaid.
The budget allocates $136 billion for public education next year, or about $24,000 per student. Lawmakers agreed to reduce spending on public schools by about $8 billion but pulled an equal amount from reserves to protect schools from those spending cuts. This complex maneuver ensures districts will have more money in future years, rejecting one of Newsom’s earlier proposals. “Since the beginning of this year, we have been committed to a budget that protects classroom funding and invests in our greatest resources, our children,” said Democratic Assemblymember Jesse Gabriel.
Newsom is expected to sign the budget into law in the coming days.
Source: Associated Press, KTVZ NewsChannel 21
