Newsom Signs Early Action Plan to Cut $17.3 Billion From California’s Budget Deficit

Newsom Signs Early Action Plan to Cut $17.3 Billion From California’s Budget Deficit

California Gov. Gavin Newsom looks on during a press conference in Sacramento, Calif., on Feb. 1, 2023. (Justin Sullivan/Getty Images)

Travis Gillmore

Travis Gillmore

4/16/2024

Updated: 4/17/2024

A bill that shaves about $17.3 billion from the state’s budget deficit was signed into law April 15 by California Gov. Gavin Newsom.
The governor said the move will ensure core services are maintained while providing flexibility to work toward balancing the state’s upcoming budget for fiscal year 2024-25, which begins July 1.
“This action strongly positions the state to pass a balanced budget in June that protects key programs Californians rely on,” Mr. Newsom said in a press release announcing the signing. “I thank our leaders in the Legislature for their commitment to finding common ground as we continue working towards responsibly meeting this challenge in the months ahead.”
Assembly Bill 106 passed on a partisan vote April 11 in both chambers after the Assembly and Senate expedited the “junior budget bill,” which takes early action on addressing the state’s record $73 billion deficit, as calculated by the Legislative Analyst’s Office.
The governor’s office and the finance department suggest the shortfall is closer to $38 billion, though analysts pointed to solutions proposed by Mr. Newsom in January that they say include an additional $20 billion in savings.
About $3.6 billion in reductions—mostly impacting one-time funding agreements—$5.2 billion in new revenue and borrowing, $5.2 billion in deferrals and delays, and $3.4 billion in shifts from the general fund to other state funds make up the plan.
Utilizing a tactic the governor criticized when adopted by former Gov. Arnold Schwarzenegger, $1.6 billion will be shifted to the following fiscal year by pushing government payroll back one day from June 30, 2025, to July 1 of the same year.
Approximately $762.5 million—the largest such reduction—will derive from not filling vacant positions in departments across the state. Another $500 million is cut from the school facility aid program.
The new law requires the Department of Finance to revisit the budget from the prior two fiscal years to adjust balance sheets and return unspent money to the state’s general fund.
Such revisions include more than $624 million from the Department of Public Works, $285 million from the Employment Development Department, more than $150 million from the Department of Food and Agriculture, and $195 million from the Public Utilities Commission.
Additionally, the law reverts to the general fund $96 million from the Transportation Agency, about $75 million from the Department of Conservation, $75 million from the Department of Parks and Recreation, $45 million from the Office of Emergency Services, and nearly $35 million from the Department of Public Health, among others.
The combination of shifts, deferrals, delays, and some cuts was rejected by Republican opponents as a gimmicky response to a significant shortfall.
“This package, like the overall budget proposed by Governor Newsom in January, will do little to bring ongoing spending in line with tax revenues,” the Senate Republican Caucus said in an April 12 press release.
The group said the now-approved plan is “papering” over the deficit for one year, while projections already made by the governor have indicated “deficits averaging over $30 billion for each of the following three years.”
With tax revenues now due, the caucus suggested the deficit could expand if collections fail to meet expectations.
“The deficit is likely to worsen once tax estimates are updated in May, even without considering the possibility of a recession,” the caucus said.
The non-partisan analyst’s office also suggested, in repeated testimony to the Legislature’s various budget subcommittees, that cuts to ongoing funding would be more beneficial in the long run, as “significant” budget deficits are forecast for the next few fiscal years.
Some Democratic lawmakers acknowledged when passing the bill that more solutions will be needed to resolve the state’s fiscal dilemma.
“This early action, of course, does not solve our budget deficit but it is significant progress,” state Sen. Scott Wiener, chair of the Senate Budget Committee, said during an April 10 hearing on the issue. “We can spend the next couple of months focusing on some of the truly difficult decisions we will have to make to pass a balanced budget, which we will do.”
The Republican Senate Leader argued that more needs to be done to protect Californians and said his party is committed to finding long-term, sustainable solutions.
“Senate Republicans continue to stand ready to work with the governor and the majority party to craft a balanced budget for Californians,“ Minority Leader Brian W. Jones said in an April 11 press release. ”They deserve a government that works for them, not the other way around. We have this opportunity next month to work together, so on behalf of my caucus, we are ready to collaborate and work for you.”
With the bill now signed, the law takes effect immediately. A revision to the governor’s earlier proposal is due by May 14, with a June 15 deadline for the Legislature to pass a balanced budget.
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Travis Gillmore

Travis Gillmore

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Travis Gillmore is an avid reader and journalism connoisseur based in California covering finance, politics, the State Capitol, and breaking news for The Epoch Times.

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