California Gov. Gavin Newsom and state Senate and Assembly leaders announced an agreement Thursday to cut $17 billion from the state’s budget in April, providing the first details of their plan to begin tackling the state’s massive deficit.
The plan calls for delaying $1 billion in funding for intercity rail projects, saving $762.5 million by cutting funding for vacant state jobs and removing $500 million from a program aimed at helping districts fund K-12 construction projects, among other proposals aimed at reducing the deficit. .
“We are able to meet this challenge thanks to our responsible fiscal management over the past several years, including record budget reserves of nearly $38 billion,” Newsom said in a statement. “There is more work to do as we finalize the budget and I look forward to the work ahead together to continue building the California of the future.”
The deal marks a rehash of a clumsy budget announcement made last month when Newsom and legislative leaders announced a premature deal without disclosing the exact amount of funding they intended to cut or detailing a single program that would be affected.
Lawmakers and the governor are working to reduce California’s budget deficit, which Newsom estimated at $37.9 billion in January, before budget forecasts are updated in the coming weeks, which would show probably puts California in an even deeper budget hole. Estimates from the Legislative Analyst’s Office suggest the deficit next year could be twice as high as Newsom’s forecast.
Lower-than-expected revenues, delayed tax deadlines, and overspending based on inaccurate budget projections have created a bleak financial situation for California. The state budget relies heavily on capital gains taxes paid by California’s highest earners, making state revenue subject to stock market volatility.
Republicans have criticized the lack of transparency in state budget negotiations and argue that Democrats created the budget crisis by continuing to fund costly programs, such as expanding Medi-Cal to all low-income immigrants, even as state revenues fall.
Assembly Republican Leader James Gallagher (R-Yuba City) called the budget deal “a setback and a failure on the part of the Democrats.”
“California’s budget has major problems and Newsom is proposing joint venture solutions,” Gallagher said.
The first series of reductions could be voted on as early as next Thursday.
“We are all committed to achieving a balanced budget on time, and this early action agreement is a critical first step in reducing the state’s deficit,” said Senate President Pro Tempore Mike McGuire (D -Healdsburg).
Because this year’s deficit is so large, Newsom urged the Legislature to take “early steps” to start reducing the deficit now, well ahead of the June 15 deadline to pass a budget.
The cuts Democrats agreed to make this month are widely seen as the easier choices, allowing them to focus on tougher deliberations later this spring. Reducing the deficit before Newsom unveils his revised budget proposal in May could also ease public perception of the state’s budget woes by reducing the deficit before it increases.
The struggle to reach consensus so far foreshadows the difficult work that awaits in May and June for a Legislature and governor with little experience handling a budget crisis, as they weigh tough choices that affect millions of Californians.
The deal announced Thursday largely reflects a plan the Senate introduced weeks ago to “reduce the deficit” by $17 billion, matching many of Newsom’s proposals to begin to offset the deficit.
The Assembly, where Democrats hold 62 of 80 seats under a new speaker, took a little longer to reach consensus and emphasized its willingness to suspend one-time spending from previous budget years that did not had not yet been dispersed, which the other parties accepted. .
Assembly Speaker Robert Rivas (D-Hollister) said his chamber’s approach was “the right way to address such a massive deficit” and that he expected Newsom to “present challenging budget proposals next month to reduce the long-term deficit.” »
The deal, according to Newsom and legislative leaders, includes:
- Save $762.5 million by refusing to fill state vacancies.
- Cut $500 million from the School Assistance Program, which funds K-12 construction projects.
- Delay $1 billion in funding for the state’s Formula Transit and Intercity Rail capital program.
- Delay providing $550 million for a grant program to build facilities to expand full-day preschool, TK, and kindergarten.
- Pay civil servants on July 1 instead of June 30 to shift $1.6 billion in payments to subsequent budget years.
The full list is available here. More details about the plan will be revealed when lawmakers introduce the text of the bill, possibly next week.
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