Gov. Gavin Newsom on Wednesday predicted California would face a budget deficit of $37.9 billion in the fiscal year starting July 1, and outlined plans to use reserves and cut spending to make up the shortfall.
Newsom’s deficit figure is considerably less that the $68 billion projected by the nonpartisan Legislative Analyst’s Office in December. However, Newsom said continued strength in California’s economy and a recent rise in the stock market made officials “less pessimistic” about future tax revenue.
“Thanks to the record reserves we have built up and a commitment to fiscal discipline over the years, our state is in a strong position to close this shortfall while protecting key priorities and programs that millions of Californians rely on,” he said.
Newsom’s plan to close the deficit includes:
- Withdrawing $13.1 billion from the state’s reserves
- Cutting $8.5 billion from existing programs and services, primarily in climate and housing
- Borrowing $5.7 billion from special funds
- Delaying $5.1 billion worth of spending, primarily transit and education improvements
- Shifting $3.4 billion in spending from the General Fund to other state funds
- Differing $2.1 billion in obligations into the next fiscal year
The governor noted that the state will still have $18.4 billion in reserves in case of future economic problems.
The total state budget in the next fiscal year will be $291.5 billion — about $19 billion less than what Newsom and lawmakers approved last June for 2023-24.
“This balanced budget plan keeps California on firm economic footing while continuing our work to tackle homelessness, keep communities safe, expand access to high-quality education, overhaul behavioral health care and fight climate change,” he said.
Senate President pro Tempore Toni Atkins praised the proposed budget as “cautious and mindful” amid the economic uncertainty.
“When I first took office in 2010, California was ill-prepared for the major budget shortfall we endured, and as a result, we saw devastating cuts to core programs and middle class tax hikes,” said the Democrat from San Diego. “Now, because of more than a decade of responsible budgeting, we’re better prepared to protect the path of progress we’ve made.”
But Republicans in the Legislature expressed skepticism about Newsom’s proposed budget.
“Welcome to year six of ‘Gavinomics’ where his budgets turn surpluses into deficits and his policies push Californians to flee,” said Senate Minority Leader Brian Jones of Santee. “As the governor pulls revenue gimmicks and accounting tricks, it’s impossible to bury the truth: California is bleeding because of a decade of Democrats’ one-party rule and reckless spending.”
Newsom blamed the deficit on two factors: the substantial decline in the stock market that drove down revenues in 2022, and a delay in critical income tax collections due to filing deadline extensions that made accurate projections difficult.
