Governor Gavin Newsom of California has signed a budget aimed at closing an estimated $46.8 billion deficit. The plan involves $16 billion in spending cuts and a temporary tax increase on certain businesses. The announcement came on Saturday, following the budget’s passage by lawmakers on Wednesday. This budget agreement required concessions from both Newsom and legislative leaders, marking the second consecutive year that California has had to scale back or delay some progressive policies that had been 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 last year, has grown even larger this year, with more deficits projected for the future. This comes just two years after Newsom and Democratic lawmakers were celebrating surpluses that exceeded $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. Inflation has 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. Additionally, the Newsom administration miscalculated the state’s revenue last year following 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 amend the state constitution to allow California to put more money in reserve for future shortfalls. However, Republicans have criticized the budget, stating they were excluded from negotiations. They have also 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 additional revenue for the state next year. Additionally, Republicans have criticized some cuts to social safety net programs.
Newsom’s plan to balance the budget includes nearly a 10% cut for almost all state departments, including the elimination of thousands of vacant state worker positions. Many previous promises have been paused or delayed. For example, 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. A promise to increase pay for workers who help people with developmental disabilities find jobs has been delayed by six months, which advocates say will result in 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 cuts and 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 of the budget 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.”
The budget represents an agreement between Newsom and legislative leaders, with both sides achieving 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.
Governor Newsom’s signing of the budget marks a significant step in addressing California’s financial challenges while attempting to maintain support for essential programs and services. The budget’s passage reflects the ongoing efforts to balance fiscal responsibility with the needs of the state’s residents.
Source: Associated Press
