Gov. Gavin Newsom proposed Tuesday a 1% cut in the state budget for the next fiscal year to keep California “on solid economic footing” amid a looming recession.
The Governor’s proposed budget for the fiscal year beginning July 1 totals $297.0 billion, a 1% decrease compared to the record $307.9 billion this year.
He said the decrease is necessary because “revenues for the coming fiscal year are significantly lower than previously anticipated — mainly due to declines in withholding and capital gains taxes.”
However, even with the cut, the budget anticipates a deficit of $22.5 billion that Newsom plans to cover by delaying some multi-year capital expenditures, not paying down some debt, cutting new climate-change programs and tapping bond funds.
He said the state does not plan to tap its $35.6 billion in reserves at this point in case the economy gets significantly worse.
“With our state and nation facing economic headwinds, this budget keeps the state on solid economic footing while continuing to invest in Californians — including transformative funding to deliver on universal preschool, expand health care access to all and protect our communities,” Newsom said.
“In partnership with the Legislature, we’ll continue to prioritize the issues that matter most to Californians while building a strong fiscal foundation for the state’s future,” he added.
Republicans in the state Senate expressed appreciation that the proposed budget does not draw down reserves but criticized the overall spending.
“The California Senate Republican Caucus is pleased that Gov. Newsom listened to our calls and is not planning on tapping into reserves,” said Senate Minority Leader Brian Jones of Santee.
“We are disappointed, but not surprised, by the governor breaking his promise to pay down our unemployment insurance debt—instead he leaves small businesses to bear the brunt of the state’s failures with a tax increase,” Jones added.
Jones said Republicans want “practical solutions to the many problems plaguing Californians.”
Some Democrats in the Legislature praised continue support for social program but expressed concerns about the cuts to climate change programs, though Newsom said the reductions are possible because California is already spending a large amount in this area.
“I am pleased to see continued funding to address homelessness and the ongoing affordable housing shortage, including the full implementation of CARE Court and $8 million for up to six months of rent or temporary housing for the unhoused,” said Assemblymember Chris Ward of San Diego.
“But I am also concerned to see cuts to our climate, green energy, and electric vehicle infrastructure commitments,” Ward said. “California needs to move away from its fossil fuel dependence that continues to contribute to the climate crisis.”
The governor’s January budget proposal serves as a starting point for months of negotiations in Sacramento before the Legislature finalizes spending in June.