CALIF. LAWMAKERS APPROVE $300B OPERATING BUDGET

Newsom says too much of surplus will go to ongoing costs

California lawmakers passed a $300 billion operating budget Monday over the objections of Democratic Gov. Gavin Newsom, highlighting disagreements among Democrats about how to spend a record-breaking surplus that, by itself, is more than most other states spend in a year.

While Newsom does not support the Legislature’s spending plan, lawmakers sent the bill to his desk anyway because the California Constitution requires them to pass a budget by Wednesday

or else they don’t get paid. Unlike in most states, California lawmakers are full time and get paid $119,702 per year.

Newsom and legislative leaders will continue negotiating with the goal of coming up with a spending plan they can all agree on before the start of the fiscal year on July 1.

The Democratic-controlled Legislature wants to spend more money than Newsom does on education and housing. Lawmakers’ plan would cover the college tuition for 150,000 more students than Newsom’s would.

And lawmakers want to borrow about $1 billion per year and use it to help about 8,000 first-time buyers purchase a home by covering 20 percent of the price. The plan could potentially lower mortgage payments by about $1,000 per month in a state where the median home price hit a record high of $849,080 in March.

“This is the budget that you ran for office for,” Assemblymember Kevin McCarty, a Democrat from Sacramento, said Monday while urging lawmakers to vote for the bill.

Lawmakers say they can afford to do those things because California’s revenues have soared throughout the pandemic as the rich have gotten richer and pay a higher percentage of their income in taxes compared with other states. This year, California’s surplus — money left over once the state has fulfilled its existing commitments — is more than $97 billion.

But Newsom doesn’t like the Legislature’s plan because he says it would spend too much of the state’s surplus — money that is only available for one year — on things that must have more than one year of funding, mostly for schools and community colleges. The Legislature’s plan would spend $2.4 billion more for ongoing expenses than Newsom’s plan, a disparity that would grow to $5.6 billion by 2026.

While California has lots of money today, the Newsom administration fears the economy is showing signs of stress as stock prices fall and inflation keeps going up because of supply chain disruptions and the Russian invasion of Ukraine.

“We’re concerned the Legislature’s budget commits an unsustainable amount to ongoing expenditures,” said Erika Li, chief deputy of budgets at the California Department of Finance, the state agency that develops Newsom’s budget proposal. “In the near future there will be a need to scale back or potentially even cut other programs.”

Lawmakers disagree. They say the extra money they want to spend is small, accounting for less than 1 percent of total spending. The Legislature’s plan would also put about $700 million more into the state’s savings accounts than Newsom’s plan would.

This type of disagreement is typical in California, where governors usually see their role as stopping the progressive Legislature from spending too much money.

But Newsom’s plan has its own concerns. It would leave the state about $25 billion over a constitutional limit on spending over the next two years, a situation the nonpartisan Legislative Analyst’s Office says could push the state over a “fiscal cliff ” that could force budget cuts even if state revenues continue to grow.

The Newsom administration has downplayed those concerns, noting its plan would spend 95 percent of the budget surplus on one-time expenses — money that could be pulled back in an emergency.

One thing Newsom and legislative leaders can agree on is they want to give a portion of the budget surplus back to taxpayers to help them pay for record-high gas prices. But they have yet to agree who should get the money, and how much they should get.