California Gov. Gavin Newsom signs budget to close $46.8B budget deficit
SACRAMENTO, California — Governor Gavin Newsom signed Saturday California’s budget must close an estimated $46.8 billion deficit through $16 billion in spending cuts and temporarily raising taxes on some corporations.
Lawmakers approved the budget Wednesday after a deal between Newsom and legislative leaders in which both sides made concessions and also won victories as they were forced for the second year in a row to roll back or delay a number of progressive policies that had been spurred 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 budget management in recent years, we can meet this moment while protecting our progress on housing, homelessness, education, health care and other priorities that matter deeply to Californians.”
The shortage was approximately $32 billion in 2023, before it gets even bigger this year, with more deficits predicted in the nation’s most populous state. Saturday’s signing came just two years after Newsom and Democratic lawmakers bragging about surpluses that totaled more than $100 billion, the product of hundreds of billions of dollars in federal COVID-19 relief and a progressive tax law that delivered a windfall of revenue from the state’s wealthiest residents.
But those revenue spikes didn’t last as inflation slowed the economy, contributing to rising unemployment and a slowdown in the technology industry that has driven much of the state’s growth. The Newsom administration then seriously miscalculated how much money California would have last year after a seven-month delay in the tax filing deadline.
California has historically been prone to large budget swings dependence on the richest taxpayersBut these deficits come at a bad time for Newsom, who is building his national profile in preparation for a possible future race for president and has been tapped as a top replacement for President Joe Biden’s campaign.
The budget includes an agreement that Newsom and lawmakers will seek to amend the state constitution to allow California to keep more money in reserve for future shortfalls.
Republicans, however, said they were left out of the negotiations. They criticized the business tax increase, which applies to companies with at least $1 million in revenue and will last for three years, bringing in more than $5 billion in additional revenue for the state next year. And they criticized Democrats for some cuts to social safety net programs.