California Gov. Gavin Newsom on Wednesday laid out a plan to offset a staggering budget deficit as the nation's most populous state weathers a revenue slump that could severely impact its 5.8 million public school children. reveal.
Just two years ago, California had a budget surplus of more than $100 billion due to a soaring stock market and massive federal coronavirus aid. That ended last year when inflation slowed the economy and led to a $32 billion deficit. This year's budget deficit could reach $68 billion, according to the latest estimates from the nonpartisan Legislative Analysis Service.
Unlike the federal government, California law requires the state to pass a balanced budget, meaning it cannot spend more than it has. Newsom and his lawmakers were able to avoid large spending cuts last year through a combination of small cuts, borrowing and deferring some spending. But as the budget deficit continues to widen, Newsom and his lawmakers may have to make difficult choices to balance the budget.
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Such decisions will be especially difficult this year, as many lawmakers will be asking their constituents to remain in Sacramento. Meanwhile, every decision Newsom makes will be viewed through the lens of his future political ambitions. His term as Democratic governor ends in 2026, and he may run for president in 2028.
A deficit could be bad news for the state's public schools. Voter-approved laws require states to spend about 40% of their annual budgets on public education, making cuts to schools difficult to avoid during economic downturns. During the Great Recession, public schools endured deep cuts that led to layoffs and school closures, and many school districts are still recovering.
The minimum amount California must spend on public schools has decreased by $16.7 billion over the past two years, according to the Legislative Analysis Service. That means lawmakers could cut public schools that much to balance the budget.
California Governor Newsom speaks in San Francisco on Thursday, November 9, 2023. He is scheduled to unveil a plan to address California's staggering budget deficit on Wednesday. (AP Photo/Jeff Chee, File)
It's also a particularly dangerous time for public schools. Billions of dollars in federal coronavirus aid will expire in September, and school districts that have become dependent on that spending will need to find ways to replace it in their budgets.
In Los Angeles, the nation's second-largest school district is starting to withdraw funding for pandemic relief. But Los Angeles Unified School District Superintendent Alberto Carvalho said its budget still relies on about $900 million, down from $1.8 billion last year.
Carvalho noted that many school districts in the state signed new contracts with unions last year that included raises to reflect inflation, and school cuts “could be extremely devastating.” said. California public school funding is typically subject to annual cost-of-living adjustments. Last year, it increased by more than 8%. This year, it could be less than 2%, according to the Legislative Analysis Service.
“That's important,” he said.
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But Carvalho and other school officials and education advocates say they are optimistic that lawmakers will avoid major cuts to public schools this year. New Assembly Speaker Robert Rivas, who is leading his first budget negotiations, said last month he is committed to protecting classroom funding.
“There's a $68 billion problem, so there's going to be some cuts. You'd be foolish to think there won't be,” said Kevin Gordon, a lobbyist representing the school district. “In fact, I think they will do everything they can to find a way to protect school funding.”
Lawmakers now have resources they didn't have during the Great Recession. In 2014, voters approved special savings accounts for public schools. Mr. Newsom and his lawmakers could cut school budgets and replace that spending with $7.7 billion from their savings accounts, according to the Legislative Analysis Service.
That way you can avoid the most drastic cuts. To save even more, lawmakers could cut one-time spending, or money set aside in previous budgets but not yet spent.
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California's budget deficit may also be much smaller than the $68 billion the Legislative Analysis Service estimated in early December. The stock market rebounded slightly. According to the Legislative Analysis Service, income tax withholdings (the amount employers deduct from workers' wages and send to the state each month) have increased slightly from last year, but are still slightly lower than previously estimated.
Still, Democrats say things will be much more manageable by May if Californians file their tax returns and state officials get a better idea of how much assets they have. It's enough to raise expectations.
“We know we have to make difficult choices,” said Rep. Jesse Gabriel, a Democrat from Los Angeles and chairman of the Assembly Budget Committee. “We don’t yet know how difficult that will be.”
