SACRAMENTO, California – Governor Gavin Newsom signed it on Saturday California budget will close an estimated $46.8 billion deficit through spending cuts of US$16 billion and temporary tax increases on some companies.
Lawmakers passed the budget on Wednesday following a deal between Newsom and legislative leaders in which both sides made concessions and also scored victories as they were forced, for the second year in a row, to scale back or delay some progressive policies that have been fueled by records. -drop in surpluses during the COVID-19 pandemic.
“This is a responsible budget that prepares for the future while investing in critical programs that benefit millions of Californians every day,” Newsom said in a statement. “Thanks to careful budget management over the past few years, we are able to meet this moment while protecting our progress on housing, homelessness, education, health care and other priorities that are deeply important for Californians.”
The deficit was around US$32 billion in 2023, before growing further this year, with more deficits projected for the future in the country’s most populous state. Saturday’s signing came just two years after Newsom and Democratic lawmakers were boasting of surpluses that totaled more than $100 billion, the product of hundreds of billions of dollars in federal COVID-19 relief and a progressive tax code that produced windfall revenues from the state’s wealthiest residents.
But those revenue spikes didn’t last as inflation slowed the economy, contributing to rising unemployment and a slowdown in the technology industry that drove much of the state’s growth. The Newsom administration miscalculated how much money California would have last year after a seven-month tax filing deadline delay.
California has historically been prone to wide budget swings, given its dependence on its richest taxpayers. But these deficits came at a bad time for Newsom, who has been building his national profile ahead of a potential future run for president and was chosen as a top surrogate for President Joe Biden’s campaign.
The budget includes an agreement under which Newsom and lawmakers will try to change the state constitution to allow California to put more money in reserve for future shortfalls.
Republicans, however, said they were left out of the negotiations. They criticized the corporate tax increase, which applies to companies with revenues of at least $1 million and will last for three years, bringing more than $5 billion extra to the state next year. And they criticized Democrats for some cuts to social safety net programs.
