With California’s economy hobbled by the impacts of the long coronavirus shutdown, Gov. Gavin Newsom asked lawmakers Thursday to sharply curtail spending on public schools and an array of government services while warning additional cuts could be necessary by year’s end.
Newsom said his budget plan, intended to erase a $54.3-billion deficit through early next summer, is designed to preserve what it can in the state’s commitment to public health, public safety and public education. Even so, the proposal leaves few programs unscathed. And it lays the groundwork for even deeper cuts, which would be automatically triggered if President Trump and Congress fail to provide billions of dollars more in pandemic assistance.
“We are going to be dealing with challenges that we haven’t faced in some time,” Newsom said.
The $203.3-billion government blueprint — $19-billion less spending than in the governor’s January proposal — serves as a stark reminder of how much has changed in the eight weeks since he issued a statewide stay-at-home order to slow the rapid increase in COVID-19 infections. Analysts from the California Department of Finance project a $9.7-billion drop in tax revenues for the fiscal year that ends in June, with three times that amount expected to be lost in the 2020-2021 budget year.
All told, 75% of the state’s budget deficit is attributed to a collapse in state tax revenues.
As a result, Newsom proposes canceling $6.1 billion in program expansions and spending increases. His plan would then divert $4.1 billion in available cash from special government funds and would lean heavily on cash reserves built up over the last decade. While the budget does not call for tax increases, it does propose canceling programs that have lowered taxes for some Californians and businesses, thus increasing revenues by $4.4 billion in the coming year.
“We are committed, despite the headwinds” of an economic downturn, Newsom said, “to balance the budget, but also to balance our principles and to advance our values.”
No cut may be more noticeable than that made to spending on K-12 schools and community colleges, the largest spending category in California’s general fund and one tightly bound to the rise and fall in tax revenues. Newsom’s budget proposes less school funding for the coming fiscal year than he envisioned in January. In broad strokes, the new proposal is seen as enough to maintain current academic year services, adjusted upward slightly for inflation and changes in attendance.
Still, the proposal represents a sizable setback for educators as they struggle to pay costs associated with distance learning and meals provided to students while schools are closed to slow the spread of the coronavirus.
A key provision in Newsom’s budget lays out a series of spending cuts totaling $14 billion that will be canceled if sufficient extra funds are provided from federal officials in Washington. On Tuesday, House Speaker Nancy Pelosi (D-San Francisco) proposed giving $900 billion to state and local governments as part of a new $3-trillion federal stimulus package. Newsom has praised the Democrats’ plan as the right thing to do in helping emergency and healthcare workers combat the coronavirus, though it has failed to earn early support from Senate Republicans.
The governor proposes using $7.8 billion from the state’s Budget Stabilization Account, the “rainy day” reserve fund in the near term, to soften the blow to a variety of government programs. His plan envisions using the rest of the reserves over a three-year period.
The fiscal blueprint laid out on Thursday bears little resemblance to Newsom’s ambitious January offering, with a variety of new programs scrapped in light of the historic deficit.
The budget plan assumes $7.1 billion in new spending for health and human services programs, a function of those resources being available largely based on a person’s income. It estimates that more Californians than ever will enroll in Medi-Cal, the state’s healthcare program for low-income residents.
But the plan includes proposed reductions for that system too. Newsom will ask the Legislature to cancel plans for expanding Medi-Cal to all adults in the U.S. illegally, a proposal long sought by immigration advocates and Democratic lawmakers. Dental benefits and spending on hearing aids for some recipients would be cut. And efforts to provide mental health services for women who have recently given birth are expected to be scrapped.
While welfare assistance grants through the CalWorks program would remain intact, spending on employment and childcare services for those receiving the benefits would no longer keep pace with the influx of new recipients.
Outside of traditional government services, Newsom said he wants the Legislature to focus on addressing the coronavirus crisis, preparing for wildfire season and making progress toward helping California’s homeless population. His budget plan envisions a unique effort to address homelessness: the purchase by the state of hotels and motels, partially with federal funds, and then gifting those buildings to local governments as permanent supportive housing. Republican San Diego Mayor Kevin Faulconer has advocated for a similar idea, arguing the owners of local properties that have become vacant during the economic downturn might have an incentive to sell their facilities.
Administration officials conceded Thursday that the absence of a key data set in the annual state budget process — total tax revenue collections — means the proposal could underestimate the severity of the coronavirus-fueled downturn. Californians who normally file and pay taxes in April were given a 90-day extension until July 15, thus leaving fiscal analysts to offer their best guess on how much there will be to spend.
Legislators will also have less information on which to base their discussions of Newsom’s plan. Both the state Senate and Assembly adjourned in March due to public health concerns and have not held their traditional public hearings examining dozens of state programs. They will now have to speed through a basic review of those needs in the next few weeks in order to meet their constitutional deadline of June 15 for sending a final budget to the governor’s desk.
By John Myers, Los Angeles Time
Times staff writer Phil Willon contributed to this story.