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California Legislature rejects many of Gov. Gavin Newsom’s budget cuts as negotiations continue
SACRAMENTO, Calif. (AP) — The California Legislature on Thursday rejected many of Gov. Gavin Newsom’s toughest budget cuts, opting instead to fast-track a temporary tax increase on some businesses to help address an estimated shortfall. of $45 billion, preserving spending on many social safety net programs.
The budget approved by lawmakers is not the state’s final spending plan. Newsom and legislative leaders are still negotiating how to fix the deficit before the new fiscal year begins on July 1. But lawmakers had to pass a balanced budget by Saturday or else lose their six-figure salaries — a rule approved by voters in 2010 to avoid the types of budget impasses that have delayed negotiations in the past.
That’s why Thursday’s vote wasn’t really a public rebuke of Newsom, a Democrat who has mostly had a good relationship with a legislature dominated by members of his own party. Instead, the vote highlights the differences between Newsom, a second-term governor who many believe has presidential aspirations, and a liberal state Legislature that is often more willing to take risks.
While Newsom’s budget proposal preserved most of the state’s major assistance programs, he included a series of smaller cuts that angered his Democratic allies. He proposed stopping paying home caregivers for some disabled immigrants on Medicaid. He wants to eliminate a program that helps provide housing to families earning less than $13,000 a year. And he suggested delaying fee increases for organizations that care for people with intellectual disabilities.
To reject these cuts, lawmakers needed to find more money. They figured it out by taking one of Newsom’s ideas and making it happen faster.
Newsom has proposed temporarily barring some companies from deducting financial losses from their state taxable income, thereby increasing their tax bill. It has become a common way to raise revenue during budget deficits. The Legislature also chose to do this, but its plan would start raising taxes a year earlier. This generated an extra $5 billion in revenue compared to Newsom’s plan.
Lawmakers also found big budget cuts elsewhere. They want to cut $1 billion from the state’s prison budget, arguing the money isn’t needed now that the prison population is about half what it was two decades ago. And they want to cancel a $400 million loan to PG&E that would help extend the life of the Diablo Canyon nuclear power plant.
These are just some of the disagreements the Newsom administration and lawmakers must resolve by the end of the month. On Thursday, both sides indicated they had made good progress. Senate President Pro Tempore Mike McGuire said lawmakers could vote on a final budget deal by the end of next week.
“I firmly believe that the final budget that we will have before us here next week will follow the same structure that is before this body here today,” he said.
One important issue that has not yet been addressed by either side is what to do about the minimum wage increase for healthcare workers, which is scheduled to begin on July 1. Newsom signed a bill last year that would end up raising the minimum wage for health care workers. to $25 per hour over the next decade.
The pay increase is expected to cost the state hundreds of millions of dollars in pay raises for some state employees and increased payments in the state’s Medicaid program, according to an analysis by the University of California-Berkeley Labor Center. Newsom has said he wants to delay the minimum wage increase, but has so far been unable to get an agreement from the state Legislature.
Republicans, who do not have enough numbers to influence policy decisions and say they have been left out of budget negotiations with Democrats, have criticized the Legislature’s spending plan as unsustainable.
Republican Rep. Heath Flora said raising taxes on businesses to help plug the deficit would be “an economy killer,” adding that “our citizens are not here to provide overdraft protections.”
“We cannot continue to invent the lie that tax increases are a solution to mismanagement,” he said.
Democratic state Sen. Scott Wiener defended the tax proposal, noting that it was just seven years ago that Congress reduced the federal corporate tax rate by 40%.
“All we ask here during a difficult budget year is that we be part of the solution,” Wiener said. “This is a very reasonable approach.”