Newsom’s $203B new budget cuts school funding, spends reserves
California Gov. Gavin Newsom’s updated $203.3 billion budget proposal would cut school funding, cancel a planned boost in public pensions spending and draw down reserves to make up for a projected $54.3 billion budget deficit brought on by the coronavirus pandemic.
The plan, unveiled Thursday, reflects a sudden recession spurred by global efforts to slow the spread of the coronavirus that causes COVID-19. In California, more than 4.2 million people have filed for unemployment since mid-March, when Newsom handed down a stayat-home order that shut down much of the state’s economy.
His office projects unemployment could peak at nearly 25 percent, roughly double the peak during the Great Recession.
“It goes without saying that these are not ordinary times,” he said. “We’re going to be dealing with challenges we haven’t faced in some time.”
The budget includes a significant decline in K-14 education funding, from $81.1 billion in last year’s budget to a projected $76 billion. The minimum amount required by California law would be $70.5 billion, but Newsom wants to add $4.4 billion from federal stimulus money the state has already received and use money that would have gone to extra pension payments to lessen the blow to schools.
Newsom’s budget proposes eliminating $2.4 billion in supplemental payments to California’s largest public pension plans, CalPERS and CalSTRS.
His revised 2020-21 budget plan would also reduce wages by 10 percent for California state workers and cut Medi-Cal services, including some dental and vision benefits.
“Nothing breaks my heart more than making budget cuts,” Newsom said. “There’s a human being behind every number. In every case, there is a dream that is deferred, in some cases denied.”
He appealed to President Donald Trump and congressional leaders to allocate more economic assistance for states. Newsom for weeks has urged Congress to provide states and local governments with $1 trillion in economic relief to prevent cuts to public safety, education and health programs.
“Federal government, we need you,” Newsom said. “These cuts can be negated, they can be dismissed with your support.”
In the meantime, Newsom is proposing to spend more than $16 billion from the state’s so-called rainy day fund by over the next three years to offset cuts. The budget also calls for more than $8 billion in funding for schools and public health that the state received from the federal government through an economic relief package passed by Congress in March.
Newsom’s office expects revenue to the state general fund -- which supports education, public safety, prisons and many social services -- to fall by $41.2 billion below his January budget proposal.
The estimate reflects a steep drop from January, when his office projected a rising economy that would yield a $5.6 billion state budget surplus and support a $222 billion spending plan. At the time, he proposed new funding for preschools, homelessness and health care programs that would benefit undocumented seniors.
California’s pandemicdriven job losses have disproportionately hit lowwage jobs, according to Newsom’s Department of Finance, widening the gap between the rich and the poor. The department estimates personal income will drop by nearly 9 percent and housing construction permits will drop more than 21 percent.
The unemployment numbers illustrate the high stakes of Newsom’s budget. He has to both fund programs that slow the spread of the outbreak while simultaneously preparing the state for an economic recovery, State Controller Betty Yee said earlier this week.
“This is a pandemic that’s both about critically saving lives and also saving livelihoods,” she said. “You can’t split the two, you have to do both.”
Newsom isn’t giving up on some of his earlier proposals, according to his budget. His budget calls for continued funding for tuition waivers at community colleges, student financial aid and a newly expanded tax credit for low-income households, as well as a fee waiver for new businesses.
There is some debate about Newsom’s projected deficit. The independent Legislative Analyst’s Office last week estimated a deficit in the range of $18 billion to $31 billion, a projection that took into account how the state could use reserves to avoid cuts and that assumed lawmakers would not fund the new programs Newsom proposed in January.