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Governor Gavin Newsom proposes painful cuts to close California’s growing budget deficit
SACRAMENTO, Calif. (AP) — California’s budget deficit is at least $45 billion, a deficit so large it prompted Gov. Gavin Newsom on Friday to propose painful spending cuts that affect immigrants, kindergartners and children. and low-income parents seeking child care in a state often touted for having the fifth-largest economy in the world.
Officially, Newsom said the state’s deficit is $27.6 billion. But it’s actually closer to $45 billion when you include previous spending reductions that Newsom and the state Legislature agreed to in March. Including reductions in public education spending, which Newsom did not include, the deficit would still be billions of dollars higher, according to a recent analysis by the nonpartisan Legislative Analyst’s Office.
The size of the deficit is important because it will shape the national outlook for Newsom, who is a key surrogate in President Joe Biden’s re-election campaign and is believed to harbor his own presidential aspirations. Newsom has spent much of his time in office basking in the glow of historic budget surpluses this allowed him to greatly expand state spending. But back-to-back budget deficits — with more on the horizon — are testing California’s commitment to those increases.
So far, Newsom has not scrapped some of his most eye-catching policy advances, including free kindergarten for all children aged 4 and over free health insurance for all low-income adults, regardless of their immigration status. But as Friday’s proposal showed, Newsom is willing to dismantle some of those promises to balance the budget.
While Newsom has not taken away anyone’s health insurance, he has proposed that the state stop paying health care workers to care for some 14,000 disabled immigrants in their homes. This would save the state $94.7 million. While he didn’t withdraw the state’s commitment to expand kindergarten, he proposed eliminating $550 million that would have helped school districts build the facilities needed to teach all those extra students.
After promising to pay for child care for another 146,000 children from low-income families, Newsom proposed Friday to halt that expansion at 119,000. And after promising to increase how much money doctors receive treat Medicaid patientsNewsom on Friday proposed canceling $6.7 billion that had been set aside for that.
The cuts provoked outrage across the political and ideological spectrum. Anthony Wright, executive director of the consumer advocacy group Health Access California, said removing home care for immigrants with disabilities would result in these people becoming “even more impoverished or ending up in much more expensive nursing home care.”
Yolanda Thomas, a member of Child Care Providers United’s negotiating team, said cutting child care openings means “we can’t build a stronger economy when our lowest-wage workers… don’t have a safe place to send your children during your shifts. ”
For every question on Friday, Newsom had a similar answer.
“I prefer not to make this cut. These are programs, propositions that I have been advancing for a long time, many of them,” she stated. “But you have to do it. You have to be responsible.”
Before the coronavirus pandemic, California’s revenues were growing at about 5% annually. From 2019-20 to 2021-22, revenues grew by an astonishing 55%. That’s because California received a lot of money from the federal government to mitigate the impact of the pandemic. And it’s because the stock market has seen historic increases, fueling a rapid expansion of wealth among California’s richest residents – generating a unexpected tax profits for the state.
The state budget is a guessing game, where governors and legislators have to predict how much money they will have and plan to spend it. After the pandemic’s bumper years, California’s assumptions are way off. The Newsom administration now forecasts that state revenues will be $83.1 billion lower than forecast for fiscal years 2022-23 and 2023-24.
“If you knew these revenue levels were unrealistically high and completely unsustainable, why wouldn’t you put a little more into the reserves,” said state Sen. Roger Niello, a Republican and vice chairman of the Senate Budget and Fiscal Review Committee. . “If that’s the case, you know everything is going to fall apart and you’re going to have a big deficit to cover.”
Newsom defended California’s past budget actions, noting the State Constitution required the state to return a large portion of that surplus to taxpayers in the form of rebates. Newsom said he “provided a lot of support at the time to people who needed money.”
“I feel like we were doing the best we could under the circumstances,” he said.
Newsom repeatedly promised Friday that he would not sign a sweeping personal tax increase. But he proposed suspending a popular tax deduction for businesses, which many see as a tax increase.
In total, Newsom proposes cuts of $32.8 billion over two years, including eliminating 10,000 unfilled government jobs and an 8% cut in state operations — including things like eliminating landlines. He promised there would be no layoffs, furloughs or pay cuts for the state’s more than 221,000 public employees.
Democratic lawmakers applauded Newsom’s effort to address several years of deficits and promised to protect spending on social safety net funds and classrooms.
“No one knows what challenges California may face, so we must always be prepared,” Assembly Speaker Robert Rivas and Assembly Budget Chair Jesse Gabriel said in a joint statement. ___ This story has been corrected to show that Newsom proposed eliminating $550 million for school facilities, not $500 million.