SACRAMENTO, Calif. (AP) — Gov. Gavin Newsom’s task of closing California’s estimated $54.3 billion budget deficit will come down to a battle with the Democratic-dominated Legislature over how much pain the state can endure now versus putting it off to next year and beyond.
Both of the budget proposals from Newsom, a Democrat, and the state Legislature save money by putting off paying billions of dollars of the state’s commitments, a common tactic used by states across the country when times are tough.
But Newsom is more willing to make permanent budget cuts now rather than push those costs to future years and hope the economy improves. His proposal relies on Congress sending the state more money to avoid those cuts. But if they don’t, his plan would cut billions to public schools, health care, child care and programs designed to keep older adults out of nursing homes.
The Legislature’s plan also relies on the federal government to cover the shortfall. But lawmakers aren’t willing to risk those budget cuts should it not happen. Instead, they put off some of the state’s biggest expenses until next year — most notably delaying $9 billion in payments to public school districts. This lets the school districts go ahead and spend the money with the promise the state will pay them back.
“It’s possible the economy could recover more robustly than our economic experts are projecting. But it’s also possible all these numbers could be even worse than we are projecting even now,” Vivek Viswanathan, chief deputy budget director for Newsom’s Department of Finance, told state lawmakers on Thursday. “We are concerned about a budget that adds several billion dollars in additional deficits.”
Lawmakers, many of whom are running for re-election, are more focused on the short-term with an emphasis on restarting the economy. A big component of that is reopening public schools. Some of the state’s largest districts have said they likely wouldn’t be able to reopen in the fall should the budget cuts take effect.
“It’s not easy to do the deferrals, but what’s the alternative? Get an award, a pat on the back for an austerity budget and shut down the schools and child care centers?” Democratic Assemblyman Kevin McCarty said. “That’s not going to help turn the economy back on.”
Compounding the problem is no one really knows how much money the state will have to spend next year. It pushed its deadline to file tax returns to July 15 because of the coronavirus pandemic.
The Newsom administration said the state collected about $500 million more in taxes last month than it had anticipated. But also on Thursday, new data showed the number of unemployment claims increased over the previous week.
“Contrary to expectations, California companies continue to shed jobs at a high pace,” said Michael Bernick, former director of the California Employment Development Department and a lawyer with the firm Duane Morris.
Lawmakers have until June 15 to send an operating budget to Newsom’s desk. If lawmakers miss that deadline, they don’t get paid. Newsom said the negotiations are “in a very good place under very difficult circumstances.”
Democratic Assemblyman Phil Ting, chair of the Assembly Budget Committee, said no one knows where the economy is going and “whatever budget we put together is going to be wrong.”
“That’s where I would say is one of the primary differences in our budget,” Ting said. “We are assuming greater financial risk for the millions of Californians who aren’t able to save $400, can’t get access to credit, can’t borrow any money, can’t assume any of that financial risk.”