Gov. Gavin Newsom
Gov. Gavin Newsom unveils his revised budget proposal for 2023-24. Photo by Rahul Lal for CalMatters

Just in time for the start of a new fiscal year on July 1, Gov. Gavin Newsom and legislative leaders have reached a deal on the state budget — a $310 billion spending plan that they say protects core programs and covers a $30 billion-plus deficit without dipping into key reserves. 

Despite largely agreeing on the overall structure for weeks, budget negotiations were delayed by the governor’s demands to include a sweeping infrastructure proposal that many lawmakers resisted. The final compromise approved Monday night narrows the types of projects that can take advantage of an expedited approval of permits, leaving out a contentious proposed water conveyance tunnel under the Sacramento-San Joaquin River Delta. 

“We are accelerating our global leadership on climate by fast-tracking the clean energy projects that will create cleaner air for generations to come,” Newsom said in a statement.

Senate President Pro Tem Toni Atkins, a San Diego Democrat, said she was “heartened” that the leaders agreed on the infrastructure package, and “in a way that focuses on equity by laying the groundwork to ensure that our most vulnerable communities will be hired first on impactful state infrastructure projects.” 

“The final budget we passed today is fiscally responsible, protects our reserves, and avoids cuts to core programs — all without increasing taxes on the middle class,” she said on Tuesday. “This budget increases funding for our public schools and community colleges, allows for rate increases for child care providers, addresses the immediate needs of transit agencies, and expands critical access to Medi-Cal and Covered California.”

This is a budget for the future,” said Assembly Speaker Anthony Rendon, a Lakewood Democrat who is scheduled to hand over the speaker’s gavel to Assemblymember Robert Rivas, a Salinas Democrat, on Friday under a negotiated transition.  

But Republican Sen. Roger Niello of Fair Oaks, the vice chair of the Senate Budget Committee, criticized the deal for including “spending that is simply unsustainable.”

Democratic lawmakers had already passed a budget, reflecting their own priorities, on June 15 in order to meet a constitutional deadline. That kicked off a 12-day window for Newsom to sign or veto the bill, increasing pressure on the two sides to reach a deal by Tuesday.

This year’s negotiations were more fraught due to a $31.5 billion deficit, a sharp contrast with record budget surpluses the last two years. The deficit is the result of a downturn in the stock market — a volatile but significant source of California’s state revenues because of its reliance on income taxes, especially those of high earners.

Bracing for potential further revenue declines, the budget deal allows the governor to delay, with notification to the Legislature, one-time spending commitments before March 1.

The budget process this year was also made more complicated when many Californians were granted until October, instead of April, to file income tax returns because of storm-related disaster declarations, which made it hard to pin down a precise figure on the state’s revenue. 

Add to that Newsom’s insistence that legislators approve his recent proposal to overhaul the permitting process for major infrastructure projects by changing the landmark California Environmental Quality Act, a move that some housing advocates and developers have demanded for years. 

The governor wanted a package of 11 measures, alongside the main budget bill, that aim to streamline the permitting process among federal, state and local governments; limit the time courts have to hear challenges on environmental reviews; and increase funding to state agencies.

Lawmakers pushed to consider the plan outside of the budget process so they would have more time to review its potential effects and to exempt the proposed Delta tunnel from the changes. That contentious $16 billion project would send water from the Sacramento-San Joaquin Delta south to 27 million people and 750,000 acres of farmland. 

Chris Jennewein of Times of San Diego contributed to this article.