SACRAMENTO, California — California has a huge budget problem that could force thorny decisions from Democratic leaders who enjoyed a surplus of more than $100 billion just three years ago.
This is the second year in a row that the nation’s most populous state has faced a billion-dollar deficit. State revenues have continued to decline due to rising inflation and a slowdown in the state’s usually robust technology industry.
Democratic Gov. Gavin Newsom announced his plan Friday to address the state budget deficit. The release of his plan kicks off a marathon budget negotiations with Democratic lawmakers, who hold supermajorities in both chambers.
Newsom and lawmakers have until June 15 to pass a budget or lawmakers won’t get paid.
Newsom on Friday proposed a $288 billion spending plan for the fiscal year that begins July 1. That’s well below the nearly $311 billion budget he signed into law last year. But it is still by far the largest of any state in the country. New York recently passed a budget of $237 billion, and Texas and Florida spend much less annually.
It’s complicated. Newsom announced a $26.7 billion deficit on Friday, but it’s actually closer to $45 billion. That’s because Newsom did not take into account actions worth roughly $17.3 billion that he and lawmakers had already agreed to. That included a $3.6 billion cut in mostly one-time funding for some school, wellness and climate programs. The plan also delays and defers approximately $5.2 billion in spending on various programs, including $1 billion to fund rail and mass transit systems.
California’s constitution requires lawmakers and the governor to balance the budget — meaning the state can’t spend more money than it has. That means they either have to find more money by raising taxes, which Newsom doesn’t want to do, or find ways to cut, shift or delay spending. Newsom’s proposal focuses primarily on spending cuts, but will also dip into reserve funding.
Newsom proposed cuts to 260 state programs. Here are some highlights:
1. Eliminating 10,000 vacant positions for state workers, for a savings of $762 million. Newsom did not immediately provide a list of all jobs.
2. Reclaiming $6.7 billion previously set aside to pay doctors more to see poor patients and immigrants.
3. Nearly 8% savings in operating costs for nearly all government agencies through actions such as eliminating landlines in state offices and evaluating printing needs.
4. Cut broadband initiatives by $2 billion to pursue cheaper options
5. Closing 4,600-bed housing units in 13 state prisons to save $81 million.
6. Reducing funding for homelessness and housing initiatives by nearly $1.2 billion, including $474 million from an anti-foreclosure program to preserve existing affordable housing.
7. Reducing $500 million in water storage funding. He did not provide details on how that would be applied.
8. Ending a home care program that serves 14,000 low-income, undocumented immigrants with disabilities for a savings of $94.7 million
9. Cut about $2 billion from six education programs, including $550 million from an initiative to improve preschool and kindergarten facilities and $510 million in scholarships for middle-class students pursuing education degrees.
10. Eliminating $352.5 million in funding for state and local public health and $189.4 million from the mental health fund.
Newsom has repeatedly said he can balance the budget without raising taxes. But his proposal calls for the suspension of the widely used corporate tax deduction on net operating losses the next fiscal year, which some see as a tax increase.
He also increases taxes on managed care organizations, the private companies that contract with the state to provide Medicaid benefits.