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SACRAMENTO, Calif. (AP) — Gov. Gavin Newsom on Saturday signed California's budget to close an estimated $46.8 billion deficit through $16 billion in spending cuts and temporarily raising taxes on some businesses.
Lawmakers
passed the budget Wednesday following an agreement between Newsom and
legislative leaders in which both sides made concessions and also had
wins as they were forced, for the second year in a row, to pare back or
delay some progressive policies that had been fueled by record-breaking
surpluses during the COVID-19 pandemic.
“This is a responsible
budget that prepares for the future while investing in foundational
programs that benefit millions of Californians every day,” Newsom said
in a statement. “Thanks to careful stewardship of the budget over the
past few years, we’re able to meet this moment while protecting our
progress on housing, homelessness, education, health care and other
priorities that matter deeply to Californians.”
The deficit was about $32 billion
in 2023 before growing even bigger this year, with more deficits
projected for the future in the nation’s most populous state. Saturday's
signing came just two years after Newsom and Democratic lawmakers were boasting about surpluses
that totaled more than $100 billion, the product of hundreds of
billions of dollars of federal COVID-19 aid and a progressive tax code
that produced a windfall of revenue from the state’s wealthiest
residents.
But those revenue spikes did not last as inflation
slowed the economy, contributing to rising unemployment and a slowdown
in the tech industry that has driven much of the state’s growth. The
Newsom administration then badly miscalculated how much money California
would have last year after a seven-month delay in the tax filing
deadline.
California has historically been prone to large budget swings, given its reliance on its wealthiest taxpayers.
But these deficits have come at a bad time for Newsom, who has been
building his national profile ahead of a potential future run for
president and has been tapped as a top surrogate for President Joe
Biden’s campaign.
The budget includes an agreement that Newsom and
lawmakers will try to change the state constitution to let California
put more money in reserve for future shortfalls.
Republicans,
however, said they were left out of negotiations. They criticized the
tax increase on businesses, which applies to companies with at least $1
million in revenue and will last for three years, bringing in more than
$5 billion extra for the state next year. And they criticized Democrats
for some cuts to social safety net programs.
