Gov. Newsom unveils $297 billion budget, $22.5 billion deficit
California is ready to weather an economic downturn — and a more than $20 billion budget shortfall — without shirking its commitments in the crucial areas of education, homelessness and fighting wildfires and the drought, Gov. Gavin Newsom attempted to reassure Californians on Tuesday as he unveiled his proposed $297 billion budget.
Newsom’s presentation was decidedly more somber than those of last year and the year before, when California enjoyed massive surpluses that allowed Newsom to send checks directly to residents, while also pouring one-time funds into everything from climate change to homelessness. This year, the governor wants to balance the budget largely by cutting funds for climate and transportation — and hopefully making up for those slices with federal funding. He also proposed delaying some funding commitments and borrowing, but stopped short of tapping into the state’s more than $22 billion in rainy day funds.
“We’re keeping our promises,” Newsom said. “I want folks to know that regardless of this modest shortfall, we’ll continue to make unprecedented investments in transforming public education and higher education… addressing this homeless crisis straight on, no cuts in that space, housing affordability — continue the progress we’ve made.”
In November, the state’s fiscal analyst delivered the grim news that California would face a projected $24 billion shortfall this year — a dizzying turnaround after last year’s unprecedented $100 billion surplus. Newsom’s estimate is slightly rosier — he predicts a $22.5 billion deficit.
With the entire country struggling on the brink of a recession amid soaring inflation and skyrocketing interest rates, it comes as no surprise that California will have to tighten its belt this year. Newsom has long been warning a downturn is on the horizon. But the deficit, which comes as the governor is emerging as a rising star on the national stage and sparking rumors of presidential ambitions, is likely to taint his political profile. And those budget woes will follow him throughout his next four years in office. The state is expected to face a $17 billion deficit next year, and shortfalls will continue at least through the 2026-27 fiscal year, according to the state’s Legislative Analyst’s Office.
Last year’s $300 billion budget sent out tax refund checks directly to Californians, invested in new programs to stem homelessness and climate change, and funded infrastructure projects. Nearly all of the funds were one-time allocations. That decision frustrated housing and homeless services providers because it precluded them from planning for long-term solutions.
But Newsom argued it was prudent, as it set the state up to weather an economic downturn.
Among some of the highlights in the proposed budget are:
• The Budget includes total funding of $128.5billion ($78.7billion General Fund and $49.8billion other funds) for all K-12education programs. K-12per-pupil funding totals $17,519Proposition 98 General Fund—its highest level ever—and $23,723per pupil when accounting for all funding sources.
• s $64.5million Proposition 98General Fund and $51.8million General Fund to continue a multi-year plan to ramp up the inclusivity adjustments for the State
Preschool Program. The 2023-24year will be the second year of the threeyear ramp up process, and students with disabilities will be required to make up at least 7.5percent of State Preschool Program providers’ enrollment.
• $7.9billion one-time for the Learning Recovery Emergency Block Grant, which supports, among other things, closing learning gaps through the implementation, expansion, or enhancement of learning supports, such as expanded instructional time, tutoring or other one-on-one or small group learning supports, and learning recovery programs.
• $15million one-time to support 6,000 teachers to receive their supplementary state certification in reading and literacy.
• $8.9billion (89percent) of ZEV investments with a focus on communities that are the most affected. This includes targeted investments in disadvantaged and low-income communities by increasing access to the benefits of clean transportation and by continuing to decarbonize California’s transportation sector and improve public health.
• The Budget includes $2.5 billion of General Fund reductions across various ZEV programs, which are partially offset by approximately $1.4 billion in fund shifts to Cap and Trade funds. Further, the Administration will pursue additional federal funding to help offset the decrease in state funds.