California Legislature approves budget that slashes spending to address $46.8 billion deficit
SACRAMENTO, California — California lawmakers on Wednesday approved a budget that dramatically cuts spending and temporarily increases taxes for some businesses. This aims to close the budget deficit of an estimated $46.8 billion.
It’s the second year in a row that the nation’s most populous state has been forced to roll back or delay some of its progressive policies fueled by record surpluses during the COVID-19 pandemic.
It was just two years ago that Gov. Gavin Newsom and his fellow Democrats were in the state legislature 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.
Those revenue spikes didn’t last as inflation slowed the state’s 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 the state would have last year after a seven-month delay in the tax filing deadline.
Last year’s deficit was approximately $32 billionThis year’s deficit has risen to $46.8 billion, and more deficits are expected in the future.
California’s budget has historically been sensitive to wide swings in revenues, given that of the state dependent on the richest taxpayers. But these shortages come at a bad time for Newsom, who has been building his national profile ahead of a possible run for president one day and has been tapped as one of the top surrogates for President Joe Biden’s reelection campaign.
The budget includes an agreement that Newsom and lawmakers will seek to amend the state constitution in coming years to allow California to keep more money in reserve to prepare for future shortfalls.
“California needs budget reform to prevent these wild swings in revenues, which require us to make really tough decisions,” said Democratic Assemblymember David Alvarez.
Newsom’s plan to balance the budget includes cuts of nearly 10% to nearly all government departments, including eliminating thousands of vacant state employee jobs.
Many previous promises have been shelved or delayed. Two years ago, lawmakers promised to help pay for child care expenses for a another 200,000 families by 2026. This budget delays that promise until 2028, with the caveat that this will only happen if money is available.
A promise to raise wages for workers who help people with developmental disabilities find jobs has been delayed by six months — which advocates say will cost them about $500 million in lost revenue. And a promise to change foster care rates has been delayed for a year.
A promise made last year to increase the minimum wage for healthcare workers this summer has been fulfilled postponed until January at the latest.
Other important expansions are protected, including making federally funded health insurance eligible for all low-income adults. regardless of their immigration status and make school lunches free for all students.
“In California, you don’t have to be loose to be progressive,” Newsom said. “We understand how to balance budgets while protecting working families, children and the most vulnerable people in this state.”
Republicans said they had been left out of budget negotiations. They criticized the business tax increase, which applies to companies with revenues of at least $1 million and will last three years, bringing more than $5 billion in additional revenue to the state next year. And they criticized Democrats for some cuts to certain social safety net programs.
“We are seeing what I can only characterize as callous cuts to those who are hurting the most. We can do much better than this,” said Republican Assemblymember Jim Patterson.
The budget represents an agreement between Newsom and legislative leaders in which both sides had victories and concessions. The legislature agreed Pacific Gas loan & Electrical $400 million as part of a plan to extend the life of the state’s only remaining nuclear power plant. And Newsom agreed to end some of his most controversial cuts to social services programs, including paying people to care for some. disabled immigrants on Medicaid.
The budget will spend $136 billion on public education next year, or about $24,000 per student. Lawmakers agreed to reduce spending on public schools by about $8 billion, but pulled an equal amount from reserves to protect schools from those cuts. The complex maneuver ensures that districts will have more money in the coming years, rejecting one of Newsom’s previous proposals.
“Since the beginning of this year, we have been committed to a budget that protects classroom funding and invests in our greatest resources, our children,” said Democratic Assemblymember Jesse Gabriel.
Newsom is expected to sign the budget into law in the coming days.