Because of the coronavirus pandemic, California faces its largest budget deficit ever - a staggering $54.3 billion in the coming fiscal year.
Gov. Gavin Newsom unveiled his May budget revision Wednesday, calling for a combination of moves, including spending cuts and balanced books. He’s looking to pull out all the tricks in California’s well-worn budget playbook by moving money around, deferring programs, capping tax credits, canceling some planned spending, and yes, cutting spending too.
Although the cuts could have been worse, if not for federal coronavirus relief that’s already coming to the state of California. The Prop 98 funding formula for the public schools, for example, calls for $19 billion in cuts.
"We are not just going to roll over and accept $19 billion of cuts to public education," Gov. Newsom proclaimed.
So, he wants to spend $4.4 billion in COVID-19 relief on the schools.
Among other things, the governor is also asking state workers to cut their pay 10%, he will rein in spending, more telecommuting, making for a more efficient state government.
"We’ll get through this," Gov. Newsom said. "And we will get through this. We’ll get through it stronger, more capable, more resilient than ever."
Chris Hoene is the executive director of the California Budget and Policy Center, an independent, non-partisan public policy organization that focuses on the well-being of low and middle income Californians. He joined KCBS Radio's "The State Of California" to discuss the governor's proposals and the road ahead for the state budget.
My biggest takeaway goes to that issue you mentioned, which is avoiding cuts, which underscores what the governor outlined in the budget, the imperative of the state receiving some additional fiscal relief from the federal government. Basically, the way they’ve outlined the budget is they can avoid the most significant cuts if there is some level of fairly significant fiscal relief if it comes from their partners at the federal level.
I’m not concerned, because most economists would tell you during a recession like this is relying on federal funding to get you through during the short term and the scale of this crisis is such that while what the federal government has put on the table so far is helpful, there’s still considerably more needed and there will be more needed in the months ahead. It seems like a reasonable alignment in order to expect that the two levels of government will work more closely together.
The timing doesn’t work out very well. Congress is debating the next federal relief package in the days to come, it could be the next couple of weeks to come. But the governor has to release a revised budget plan by May 14, so he’s doing that today, expecting there will be some forthcoming revenues. Then, this will all kind of shake out because the budget has to be finalized by the end of June. Some of it’s just timing. If I wished he was doing more in one arena, it’s that they’ve left one part of the toolbox unused so far. They haven’t really talked about the use of new revenues in order to make up some of the shortfall and/or to invest in some of the people who are actually struggling because of COVID-19.
Not necessarily really surprised. We’re not really in a finalized budget and there’s still that question of the federal fiscal relief. I think the state’s going to have to do more than just cover a large budget shortfall in order to come out of this crisis more quickly. That means there’s going to have to be some additional assistance provided to the small businesses, the workers, the families who have been impacted, and that’s going to take more than a shortfall and they’re not going to be able to do that without addressing the revenue side in some sort of significant way.
That is a very painful decision that they’ve made. That’s a cut that has been on the books to be implemented a couple fiscal years ago. Gov. Brown in his last year and Gov. Newsom in his first year have put budgets forward in order to delay that cut from happening. What Gov. Newsom is now saying is that the 7% cut goes forward. What it essentially means is the workers who provide that in-home care are basically losing 7% of their income. They’re still doing the work, but they’re being asked to work for free 7% of the time. That’s a very difficult decision to make in any state budget and its certainly a difficult circumstance for those workers.
We have a very robust economy that, in some respects, is still going full cylinder for some people. We know that over the last 10 years, the economy grew dramatically, but it was mostly concentrated in very high-wealth households, high-wealth industries. Meanwhile, most of the people who are now the ones that are weathering the storm in terms of the economic hit of COVID-19, they were struggling for the last 10 years already. We’ve needed to put some revenue options on the table that need to deal with the fact that we have a severe wealth and income inequality problem and I think in order to get out of this going forward that’s going to have to be part of the equation.
I’m in Sacramento, just to be clear, but I did spend more than a decade in Washington and certainly track those issues closely. Everything in Washington is highly-politicized. As the governor said in his news conference today, the reality is that every governor in the nation is going to be telling members of Congress the same story. California is telling that story a bit earlier than some of the other states because of the way our process works, but this story of shortfalls, budget cuts, impacts on the folks who are in the most need right now, isn’t going to be a red state or a blue state story, it will be an American story. I think Congress will come around and they’re playing the usual game of trying to figure out if they can work the politics of this to their advantage, but I expect there will be a compromise in the next couple of weeks.