(The Center Square) – California Governor Gavin Newsom and the state legislature agreed to a combination of spending cuts, borrowing, delays, fund shifts, and deferrals that will reduce the state’s $73 billion deficit by $17.3 billion. However, with spending cuts making up only $3.6 billion and the state projected to carry deficits in the tens of billions of dollars for the next several years, public finance experts say real downsizing is required by fiscal reality.
“I thank our legislative leaders for their partnership in taking this major step to address the shortfall with a balanced approach that meets the needs of Californians and maintains a strong fiscal foundation for the state’s future,” said Newsom in a statement.
Under 2004’s Prop. 58, California is required to adopt balanced budgets each year, and is barred from financing deficits by taking out more debt. With 2023’s jobs gains revised down from 325,000 to just 50,000, and annualized tax revenues coming in about $36 billion less than the governor’s estimates, it’s possible the state could face an even worse deficit than the $73 billion currently estimated by the state-funded, non-partisan Legislative Analyst’s Office. As a result, state leaders will, at some point, be required to make significant spending cuts to meet constitutional requirements.
“The moves proposed by the supermajority are the obvious maneuvers customarily made when revenues decline. The next step would be to determine which programs should be reduced or eliminated,” said public finance expert and former State Sen. John Moorlach to The Center Square. “It is not until Sacramento reaches this stage that the real work of necessary downsizing will occur.”
Republicans, who are a superminority in both bodies of the state legislature, condemned Democrats for the state’s budget predicament. Should major cuts be required, Newsom may have no choice but to enlist Republicans in a budget compromise should more progressive Democrats refuse to vote for his budget.
“Sacramento Democrats have controlled the budget for decades, and now the very people who squandered a $100 billion surplus just a few years ago are now attempting to ‘fix’ a massive shortfall of their own doing,” said State Sen. Brian Dahle, R-Bieber, in a statement to The Center Square. “Newsom and the majority party have left legislative Republicans out of the conversations for years, and no surprise, they’ve done it again.”
According to the governor’s office, the budget bill could be taken up for votes in the Assembly and Senate as soon as Thursday, April 11. A final budget for the remaining deficit will be released later in the spring.
