California Democratic leaders announced Thursday that they have reached an agreement on a plan that will reduce the state’s staggering multibillion-dollar funding shortfall by $17.3 billion through a combination of spending cuts, deferrals and postponements.
Governor Gavin Newsom has enjoyed an unprecedented budget surplus of more than $100 billion during the coronavirus pandemic. But he has run multibillion-dollar budget deficits over the past two years, an unwelcome position for a governor seen as a future Democratic presidential candidate.
Facing a $32 billion budget deficit last year, Newsom and lawmakers were able to avoid large spending cuts by making small cuts, borrowing and deferring some spending to later years. Ta. But this year’s budget deficit could reach $73 billion, according to the nonpartisan Legislative Analysis Service. Newsom said in January that the deficit was actually $37.9 billion. The shortfall is still large, but much easier to manage for a state whose revenue is expected to exceed $291 billion.
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In January, Newsom proposed tapping $13 billion from reserves and cutting spending by $8.5 billion, with about half of the cuts spread across a range of programs related to housing and climate change. Mr. Newsom and Democratic leaders in both chambers announced last month that they had agreed on a solution to address the deficit, without sharing details.
The new agreement with Democrats, who hold supermajorities in both chambers, includes a number of proposals that Newsom and the state Senate put together earlier this year. The plan calls for $3.6 billion in mostly one-time funding cuts to some schools, human services and climate change programs, and a previously proposed $1.2 billion reduction in housing and homelessness programs. Reductions are excluded. The plan also defers or defers about $5.2 billion in spending for a variety of programs, including public transportation and preschool facilities. It also gave Newsom the authority to freeze additional one-time funding included in the past three years’ budgets.
California Governor Gavin Newsom speaks in Sacramento, California on January 10, 2023. (AP Photo/Jose Luis Villegas, File)
The agreement comes after lawmakers passed a bill that would increase state taxes on managed care health plans, also known as the managed care organization tax, which are expected to bring in $3.8 billion in the next fiscal year. The plan does not address major spending pledged by the governor, such as free health insurance for all low-income adults regardless of immigration status.
“Thanks to responsible fiscal management over the past several years, we were able to meet this challenge, including record budget reserves of nearly $38 billion,” Newsom said in a statement. Ta. “There is still work to do before we finalize the budget, and we look forward to working together to continue building the California of the future.”
Lawmakers are scheduled to vote on a new budget next week, paving the way for further budget negotiations before a June deadline.
“We are all committed to delivering a balanced budget on time, and this early action agreement is an important step toward narrowing the state’s shortfall,” Senate President Mike McGuire said in a statement. This is the first step.”
Assembly Speaker Robert Rivas said the deal was the “right way” to address the budget deficit. But Republican lawmakers on Thursday denounced the plan, saying they had been shut out of discussions.
“Our caucus has nothing to do with that,” Republican Sen. Roger Niello said Thursday. “We will learn all of this later, at about the same time as 8 million voters.”
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Unlike the federal government, California law requires the state to pass a balanced budget, meaning it cannot spend more than it has. Newsom plans to introduce a revised budget in May, and lawmakers have until June 15 to pass it.
