California Governor Gavin Newsom said the state’s budget deficit is expected to climb to nearly $32 billion, nearly $10 billion more than he forecast in January.
Newsom revealed his revised budget plan for the fiscal year beginning July 1 on Friday, proposing a plan that would cover the deficit while potentially leaving the state with multibillion-dollar deficits in the future.
“It was not an easy budget, but I hope you see that we will do our best to hold the line and take care of the most vulnerable and needy, while remaining cautious,” Newsom said.
To cover the projected shortfall, Newsom proposed a combination of modest spending cuts, increased borrowing and a plan to push back some spending in future budget years, creating a projected annual deficit of $14 billion. by 2027.
Republicans in the state Legislature criticized Newsom’s plan, with GOP Assembly Leader James Gallagher saying in a statement: ‘His cuts to drought programs are dangerous, his ‘fiscal gimmicks’ are short-sighted and his words about good government and efficiency are yet another empty promise. Californians deserve better’
The projected $31.5 billion shortfall would mark California’s first budget shortfall since Newsom took office in 2019, and follows several years of booming surpluses as tax revenues rose.
The projected $31.5 billion shortfall would mark California’s first budget shortfall since Newsom took office in 2019, and follows several years of booming surpluses as tax revenues rose.
California has a progressive tax system that relies heavily on the wealthy and taxes investment gains as regular income, meaning it derives about half of its income from just 1% of the population.
When the economy is good and the stock market is booming, the wealthy pay more taxes and incomes can skyrocket quickly. When the economy is bad, they pay less and income can drop just as quickly.
Newsom, a second-term Democrat, has offered no major personal tax increases or spending cuts to the state’s most important programs, including those that impact public education, health care and homelessness.
His plan would cut spending by about $10.6 billion — about $1 billion more than he proposed in January — while covering the rest of the deficit through a combination of borrowing and delaying some spending. while shifting other expenses to different sources.
Unlike the federal government, California must pass a balanced budget each year, which means that state revenues and expenditures must be the same. Newsom’s budget is balanced this year.
But in the future, this would commit the state to spending more money than expected. Under Newsom’s plan, the deficit would be $5 billion next year and reach $14 billion by 2027.
“For the Governor to continue to overspend and create structural deficits in the years to come is fiscally irresponsible,” said Assemblyman Vince Fong, a Republican from Bakersfield who serves as vice chairman of the Budget Committee. the Assembly.
California Governor Gavin Newsom said the state’s budget deficit is expected to climb to nearly $32 billion, nearly $10 billion more than he forecast in January.
Newsom’s budget includes $3.7 billion for various programs to get homeless people off the streets and into shelter. Pictured: Homeless encampments in San Francisco in January
Newsom said it’s common for future budgets to be out of balance, especially during lean years.
He also said Democrats, who control state government, have learned to use the volatile tax system to their advantage. Newsom’s plan would leave California with $37.2 billion in various savings accounts, money he says could be used to balance future budgets.
“A progressive tax system allows us to accumulate billions and billions of dollars for exactly this moment,” Newsom said.
Predicting how much money California will have this year is especially tricky after a series of severe and devastating storms prompted state officials to extend the normal April tax filing deadline until October. for almost all residents.
Newsom said he hopes the state will hit about $42 billion in October, but isn’t sure.
“I want all the $42 billion plus,” Newsom said. ‘I want to be surprised.’
While the governor’s proposed spending cuts are small, they are still likely to impact several core programs.
Newsom’s budget includes $3.7 billion for various programs to get homeless people off the streets and into shelter, but he wants to cut some spending on the related issue of housing, even in the face of serious shortage.
The governor has proposed about $700 million in spending cuts or deferrals by delaying money from programs that help nonprofits turn foreclosed properties into affordable housing and recovering funds meant to transform commercial buildings and industrial housing.
“It’s disappointing that the governor isn’t taking bigger steps to address California’s worsening housing crisis,” said Michelle Pariset, director of legislative affairs for Public Advocates, a nonprofit law firm. profit and an advocacy group.
“Until we tackle the housing issues in our communities at the scale of the problem, we will see more and more of our neighbors struggling, being displaced and being pushed into homelessness.”
Newsom’s budget proposal must first be approved by the Democratic-controlled Legislature.
A series of severe storms prompted California to delay the tax filing deadline until October for nearly all residents, making budget projections more difficult. Pictured: A military vehicle drives through floodwaters on March 14 in Pajaro, California
An aerial view shows homes underwater after a levee burst in San Joaquin County, California on March 21. California has suffered a series of devastating floods and storms this year.
Since taking office in 2019, Newsom’s biggest budget fights with lawmakers have been over how to spend record surpluses, and agreeing cuts may be more difficult.
Newsom last year signed an expansion of a subsidized childcare program that would pay to help an additional 20,000 families. But he is now proposing to delay that funding for a year, saying the state is struggling to fill its existing child care slots.
That angered some Democratic lawmakers who said the problem was that there weren’t enough child care staff.
On Monday, House Democrats proposed $1 billion in new spending to boost the wages of these workers, and on Friday Speaker Anthony Rendon said bolstering child care would be a priority.
“Improving child care rates help children and the economy,” Rendon said.
Newsom’s budget would also protect spending in other priority areas such as expanding eligibility for Medicaid, the government-funded health insurance program for the poor and disabled.
“We appreciate the continued commitment to improve and expand (Medicaid), a lifeline for 15 million Californians, more than a third of the state,” said Anthony Wright, executive director of advocacy group Health Access. California.
The budget would lend $150 million to some public hospitals that are at risk of closing.
And it would reimpose a tax that expired in 2022 on managed care organizations, private companies that contract with the state to administer Medicaid benefits, bringing in about $19.5 billion in additional revenue to the state. 2026.
Newsom said he wants to use some of that money to increase the amount Medicaid pays for care, to benefit hospitals and other providers.
