Legislature passes placeholder budget
SACRAMENTO — California lawmakers approved a placeholder budget Monday as negotiations continued with Gov. Gavin Newsom over how to close a projected $54.3 billion deficit that has opened up during the coronavirus pandemic.
Despite a constitutional requirement to pass a balanced budget by June 15 or go without pay, the Legislature was unable to reach a deal with Newsom, who must sign or veto the bill. Both the Senate and the Assembly instead passed a separate budget framework they crafted and plan to amend it later through followup measures.
Legislative leaders remain at odds with Newsom about how to avoid severe cuts to public services that they argue would disproportionately harm the state’s neediest residents. Both sides are counting on a bailout from Congress, but disagree about what to do should none materialize.
Further complicating matters, tax collection deadlines were delayed until July 15, after the start of the new fiscal year, leaving the state without a clear picture of how much it will have to spend.
“This is a time of great uncertainty. This is a very different budget than we thought we’d present,” Assemblyman Phil Ting, DSan Francisco, said on the Assembly floor. “There are a lot of things that we are assuming but I can’t really say we know for certain what will happen.”
The budget passed along nearly partyline votes of 6113 in the Assembly and 2911 in the Senate, with Republicans largely opposed.
While lawmakers adopted many of the strategies Newsom proposed last month — including tapping reserve accounts, temporarily limiting corporate tax credits and borrowing from special funds — they balked at his steep cuts to education and safety net programs.
Instead of letting about $14 billion of spending reductions take effect at the start of the fiscal year on July 1, the Legislature seeks to hold off on any cuts until October on the assumption that the federal government will come through with a bailout before then. If the money does not materialize, lawmakers want to dip further in the state’s reserve accounts and defer some payments into future years to avoid most of the cuts altogether.
“We learned tough lessons during the last downturn,” Sen. Holly Mitchell, DLos Angeles, said on the Senate floor, “and cuts to programs that our state’s vulnerable populations depend upon oftentimes exacerbate the problems we are trying to address.”
Senate President Pro
Tem Toni Atkins, DSan Diego, said that although there would be changes in the final agreement with Newsom, it would “not deviate from the principles we have outlined in the budget” to “avoid wreaking further havoc on Californians’ lives.”
During a news conference, Newsom said negotiators were “making real progress” on a deal and he remained “confident that something will happen at the federal level to help mitigate the impact of cuts at the state level.”
Tensions over the governor’s handling of the pandemic have underscored the negotiations.
Newsom issued dozens of executive orders and spent billions of dollars while the Legislature was sidelined by an emergency recess early on in the pandemic. During several recent budget hearings, lawmakers complained that the Newsom administration had not consulted enough with them on its coronavirus response. They pushed backed against a proposal to put nearly $3 billion more into a contingency fund for the governor to deal with potential future outbreaks.
“This budget rejects the governor’s attempt to usurp the Legislature’s authority to oversee state spending,” said Assemblyman Jay Obernolte, RBig Bear Lake (San Bernardino County). “I would also like to express my hope that we will continue to hold the line as negotiations with the governor proceed.”
The Legislature also passed several budget trailer bills that dictate how the spending plan will take effect, including one that would raise more than $4 billion in new revenue next year by temporarily limiting corporate tax credits. Republicans criticized Democrats for raising taxes on businesses hit hard by the pandemic, saying they weren’t dealing with structural problems in state spending.
“We have no idea where the rest of this budget is going to go, yet we’re voting for more revenue to start the whole debate,” said Sen. Jim Nielsen, RGerber (Tehama County). “My fear is, as usual, that’ll be revenue that goes down a dark hole and in another year, we’ll be on the precipice of another deficit.”