Newsom Orders Spending Freeze in Light of California’s $68 Billion Deficit

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Newsom Orders Spending Freeze in Light of California’s $68 Billion Deficit

California Gov. Gavin Newsom speaks as he attends the Climate Ambition Summit at the United Nations Headquarters in New York City on Sept. 20, 2023. (Kena Betancur/Getty Images)

Travis Gillmore

Travis Gillmore

12/14/2023

Updated: 1/13/2024

California Gov. Gavin Newsom has ordered a statewide spending freeze for all non-critical expenditures, according to a letter sent by the state’s finance department to heads of all departments.
“This letter represents the Administration getting a head start on this process by directing state departments and agencies to place an immediate hold on any spending that isn’t directly associated with essential government operations in the current fiscal year,” H.D. Palmer, deputy director of the state’s finance department, told The Epoch Times by email Dec. 14.
Such follows a recent report from the nonpartisan Legislative Analyst’s Office showing the state faces a $68 billion budget deficit that is expected to expand to $155 billion over the next three years.
“The State of California anticipates significant General Fund budget deficits in fiscal years 2023-24 and 2024-25,” Joe Stephenshaw, department of finance director, wrote in the letter (pdf). “Accordingly, this [budget letter] directs all entities under the Governor’s direct executive authority to take immediate action to reduce current-year General Fund expenditures.”
Noting the severity of the deficit and the urgency of the matter, he ordered department heads to address the situation immediately.
“It is vitally important that state government is efficient, effective, and only expends funds that are necessary to the critical operation and security of the state,” the letter reads. “As such, all state entities must take immediate action to reduce expenditures and identify all operational savings achieved.”
Details provided in the letter reveal the broad nature of the freeze—affecting departments across the state with sweeping halts of non-essential spending.
Departments are prohibited from entering into any new contracts or agreements or making any changes to existing contracts that increase costs to the state. No new goods or service purchase orders are allowed, and equipment lease or purchase plans are blocked, barring a time-sensitive or critical need.
Travel—both in and out of state—related to seminars, conferences, and training, and all other such expenditures not required for official state business are ordered canceled.
Other than one exception for corrections employees, planned buybacks of accrued vacation and leave time for state workers are also canceled.
Additionally, office supplies are to be extinguished before ordering more, whenever possible and information technology costs are to be heavily scrutinized, evaluated, and identified for termination.
Exemptions to the spending freeze are only for declared emergencies, providing 24-hour medical care, and in instances where significant savings are achieved, or revenue losses avoided.
All savings and instances of exemptions are to be submitted monthly for review, according to the letter.
One state lawmaker said the freeze is needed to address the looming budget deficit.
“It’s the financially responsible thing to do,” Assemblyman Bill Essayli (R-Corona) posted Dec. 13 on X, formerly known as Twitter. “I support the call for a spending freeze until we get a better handle on the budget situation.”
The last time the state encountered a spending freeze was in the spring of 2020 after revenues plummeted following the shutdown of businesses following the implementation of COVID regulations.
Work furloughs followed in that instance, though it remains unclear if such are planned in the coming year.
“The situation is so dire the state is telling agencies not to replace broken printers or re-stock office supplies,” Rep. Kevin Kiley (R-Calif.) wrote Dec. 14 on X. “Workers are being stripped of benefits and could face furloughs.”
Declining revenues are again to blame for the freeze, with the analyst’s office noting a “severe” drop in income and sales tax receipts.
Some suggest a combination of state spending and people leaving California are impacting the state’s finances.
Mr. Newsom’s office referred all requests for comment to the Department of Finance.
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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