California Governor Gavin Newsom and lawmakers have come to a budget agreement aimed at addressing multi-year deficits. The agreement involves cutting $16 billion, declaring a statewide fiscal emergency to use reserves, and setting up a system to ensure long-term fiscal stability. The deal is based on the fiscal structure proposed in Newsom’s May budget revision, with the goal of balancing the budget in 2024-25 and 2025-26.
The agreement has faced criticism, particularly from the Republican minority in the legislature, who argue that Democrats have overspent and mismanaged the state’s finances. Senator Roger Niello, vice chair of the Senate Committee on Budget and Fiscal Review, expressed concerns about the state’s path towards deficits and unsustainable spending. This highlights the ongoing political tensions around budget decisions in California.
The budget agreement involves tapping into reserves, including the state’s rainy day fund. It outlines plans to take $5.1 billion from the fund in 2024-25 and $7.1 billion in fiscal year 2025-26. Additionally, lawmakers intend to use $900 million from a safety-net reserve account in the upcoming year. Despite these withdrawals, about $11 billion of the rainy day fund will remain intact.
The agreement on the $297.7 billion spending plan comes after challenging negotiations between Governor Newsom and Democratic leaders in the legislature. Slowed revenues and the need to scale back ambitious social programs contributed to the strained relationship. However, Senate President pro Tempore Mike McGuire emphasized the efforts made to shrink the budget deficit, protect progress, and maintain responsible reserves.
Apart from the budget agreement, Governor Newsom also reached a school funding deal with the California Teachers Association. The deal involves adding $5.5 billion to school funding over the next two fiscal years, which partially offsets the $12 billion reduction initially proposed. The agreement also includes provisions to restore funding for Homeless Assistance and Prevention grants and to allocate funds for cleaning up homeless encampments.
The budget plan maintains levels of climate and transportation spending proposed by Governor Newsom. It largely retains the original $54 billion climate package, with a focus on shifting funds to the Greenhouse Gas Reduction Fund. Additionally, the budget outlines reductions in the prison budget over a three-year period, including deactivating housing units in prisons and cutting vacant positions to achieve savings.
The budget agreement includes delays in funding for certain internet infrastructure projects, such as the “last mile” work in the internet-for-all program. However, it allocates funds for expanding and improving the fiber-optic network and sets aside money for last-mile projects spread over multiple budget years. This reflects a mix of adjustments, compromises, and future investments in critical areas.
Overall, the budget agreement in California reflects the complex and challenging nature of fiscal decision-making in a large, diverse state. Despite criticisms and tensions, the agreement represents an attempt to address deficits, maintain key programs, and plan for long-term stability. It underscores the need for collaboration, negotiation, and compromise in navigating the complexities of state budgeting and governance.