California Governor Gavin Newsom and lawmakers have come to a budget agreement that they believe will help close multi-year deficits by making $16 billion in cuts and declaring a statewide fiscal emergency to utilize reserves. This agreement is an effort to maintain the fiscal structure proposed in Newsom’s May budget revision to balance the budget in the years 2024-25 and 2025-26, based on current revenue and spending projections. Additionally, there will be a bill in August that requires the state to set aside a portion of future surplus funds and create a 2026 constitutional amendment to grow the state’s rainy day fund.
The agreement to tap into reserves by declaring a statewide budget emergency has sparked criticism from the Republican minority in the state. They argue that the Democrats in control of California have overspent and mismanaged the state’s finances, leading to deficits and unsustainable spending. Senator Roger Niello, vice chair of the Senate Committee on Budget and Fiscal Review, expressed his disappointment with the spending plan and its implications for California’s financial future.
The budget agreement involves taking $5.1 billion from the state’s rainy day fund in 2024-25 and proposing to use $7.1 billion in fiscal year 2025-26 from reserves. Lawmakers also intend to withdraw $900 million from a safety-net reserve account in the following year, leaving approximately $11 billion of the rainy day fund intact. This $297.7 billion spending plan was the culmination of weeks of negotiations between Newsom and the legislature’s Democratic leaders, who had to scale back ambitious social programs due to slowed revenues.
Included in the budget deal is a funding agreement with the California Teachers Association, which would add $5.5 billion over the next two fiscal years to schools, offsetting an original plan to lower guaranteed amounts by $12 billion. The agreement also restores $1 billion in Homeless Assistance and Prevention grants that were at risk of being cut and allocates $150 million for homeless encampment cleanup. Overall, the budget maintains commitments to climate and transportation spending while making necessary adjustments to address financial challenges.
The budget plan includes reductions in the prison budget, with a focus on deactivating housing units and cutting vacant positions to save money. There are also delays in funding for certain projects, such as internet infrastructure work, to spread out costs over multiple budget years. Despite these adjustments, the budget aims to preserve critical programs and services while making strategic cuts to address the state’s financial needs.
The California budget agreement represents a concerted effort to address deficits and ensure long-term fiscal stability for the state. While there may be disagreements and criticisms from various parties, the goal is to navigate the current financial challenges and maintain responsible budget practices moving forward. By making tough decisions and prioritizing key areas of spending, California aims to emerge from this budget year stronger and more resilient than before.