California lawmakers vote for $17B deficit reduction plan

• The California Legislature passed nearly $17 billion in spending cuts Thursday.
• Previous efforts pushed by Gov. Gavin Newsom and his Democratic allies have provided small revenue boosts, including $1.5 billion in additional revenue from increased taxes on companies that administer the state’s Medicaid program. .
• Lawmakers have already rejected attempts to reduce the budget deficit by raising income taxes or making deep cuts to social welfare programs.

California lawmakers don’t know exactly how big the deficit is, but on Thursday they determined the deficit was large enough to move forward with spending cuts of about $17 billion.

The vote marks a pre-emptive strike by Democratic Gov. Gavin Newsom. The governor is trying to get ahead of a stubborn shortage that is increasing every month and will likely extend into next year and beyond — as the second-term governor could be eyeing a campaign, White said. For the house.

In his first term in office, Newsom enjoyed a series of historic surpluses and oversaw a major expansion of government services. But that growth ended last year, leaving the state with a nearly $32 billion shortfall.

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Things got worse in January when Newsom announced another $38 billion deficit. The nonpartisan Legislative Analysis Service said the shortfall was actually $58 billion because Newsom said he should have included some cuts to public education spending. LAO then updated its deficit estimate to $73 billion in February as state revenues continued to fall short of projections.

Since then, Newsom and his Democratic allies in the state Legislature have done everything they can to reduce the deficit. Last month, the government raised taxes on the companies that administer the state’s Medicaid program, raising an additional $1.5 billion.

There were no high-profile cuts in the cuts lawmakers approved Thursday. Despite California’s recent fiscal crisis, Democrats in charge have refused to raise income taxes or make deep cuts to its most expensive programs, including health care and public education.

Instead, most of the savings come from canceling or deferring expenditures that were approved in previous years but have not yet been expended. A number of accounting efforts have also been made to make the shortfall appear smaller, including shifting state employee pay by one day from June 30 to July 1, allowing the state to record $1.6 billion in payroll for the next fiscal year. I also use the above trick.

This gives Democrats confidence that California’s budget problems are only temporary. The state is known for its volatile incomes, especially given its overreliance on wealthy taxpayers who earn most of their income in the stock market.

“We’re trying to make thoughtful choices here,” said Democratic Congressional Budget Committee Chairman Jesse Gabriel. “At the same time, from my perspective, one of the worst outcomes here would be to cut critical programs that serve the most vulnerable and then realize later that those cuts didn’t need to be made. ”

Republicans have long been dissatisfied with Democrats’ approach to addressing the deficit, and lawmakers have argued for structural changes to state spending to better align with state revenue realities. On Thursday, Republican Rep. Vince Fong declared, “All we’re doing is pushing this crisis into the future.”

Still, Democrats have argued for months that they will likely have to make “tough decisions” on the budget later this year. LAO expects a deficit of $30 billion next year, the third consecutive year of multi-billion dollar deficits.

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“Just stopping one-time spending is no longer going to solve this problem,” Democratic Rep. Cotti Petrie-Norris said.