California Democrats Agree On Plan To Reduce Budget Deficit By $17.3 Billion
SACRAMENTO, California -- California's Democratic leaders announced Thursday that they had agreed to a plan that would reduce the state's staggering California's Democratic leaders have agreed to a plan to reduce the state's multibillion-dollar deficit by $17.3 billion through cuts, delays and postponements. The plan includes a $3.6 billion cut in funding for some schools, welfare, and climate programs, leaving out previously proposed cuts of $1.2 billion to housing and homeless programs. The state's governor, Gov. Gavin Newsom, ran a budget surplus of over $100 billion during the COVID-19 pandemic, but the past two years have resulted in a deficit of $37.9 billion. The agreement comes after lawmakers passed legislation to increase the state’s tax on managed care plans, which is estimated to raise $3,8 billion next fiscal year. The new budget plan does not alter Newsom's major spending commitments, including free health insurance for all low-income adults regardless of immigration status.
Published : 4 weeks ago by James in Finance
SACRAMENTO, California — California’s Democratic leaders announced Thursday that they had agreed to a plan that would reduce the state’s staggering multibillion-dollar deficit by $17.3 billion through a combination of cuts, delays and postponements.
Gov. Gavin Newsom ran an unprecedented budget surplus of more than $100 billion during the COVID-19 pandemic. But the past two years have saddled him with a multibillion-dollar deficit, a less welcome position for a governor seen as a potential future Democratic presidential candidate.
Last year, faced with a $32 billion deficit, Newsom and lawmakers avoided major cuts by making smaller cuts, borrowing and shifting some spending to future years. But the deficit could reach as much as $73 billion this year, according to the nonpartisan Legislative Analyst’s Office. Newsom said in January that the deficit is actually $37.9 billion — a deficit that, while still steep, is much easier to manage for a state with revenues expected to top $291 billion.
In January, Newsom proposed taking $13 billion from reserves and cutting $8.5 billion in spending, with about half of those cuts spread across various housing and climate programs. Newsom and Democratic leaders in both houses announced without details last month that they would take “early action” to address the deficit.
The new deal with Democratic lawmakers, who have supermajorities in both houses, includes many proposals Newsom introduced in January. The plan calls for a $3.6 billion cut in mostly one-time funding for some schools, welfare and climate programs, leaving out previously proposed cuts of $1.2 billion to housing and homeless programs. The plan also delays about $5.2 billion in spending on a variety of programs, including public transportation and preschool facilities. It also authorizes Newsom to freeze unspecified additional one-time funding that had been included in the budget for the past three years.
The agreement came after lawmakers passed legislation to increase the state’s tax on managed care plans, also known as the Managed Care Organization tax, which is estimated to raise $3.8 billion next fiscal year. The plan does not alter the governor’s major spending commitments, including free health insurance for all low-income adults regardless of immigration status.
“We are able to meet this challenge because of our responsible budget management over the past several years, including record budget reserves of nearly $38 billion,” Newsom said in a statement. “There is still work to be done as we finalize the budget and I look forward to the work ahead as we continue to build the California of the future together.”
Lawmakers are expected to vote on the new budget plan next week, which would pave the way for more budget negotiations ahead of the June deadline.
“We are all committed to delivering a balanced budget in a timely manner and this early action agreement is a critical first step to reducing the state’s deficit,” Senate President Pro Tempore Mike McGuire said in a statement.
Parliament Speaker Robert Rivas called the deal “the right way” to tackle the budget deficit. But Republican lawmakers rejected the plan Thursday, saying they had been left out of the conversation.
“Our caucus has absolutely nothing to do with it,” Republican Sen. Roger Niello said Thursday. “We’ll learn all these things later, at about the same time as our 8 million voters.”
Unlike the federal government, California law says the state must pass a balanced budget — meaning it can’t spend more money than it has. Newsom will present his revised budget proposal in May, and lawmakers have until June 15 to approve the budget.
This story has been updated to correct the Legislative Analyst’s Office’s most recent budget deficit projection to as much as $73 billion, not $68 billion.
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