SACRAMENTO, Calif. (CN) — Veering from Governor Gavin Newsom’s strategy, California lawmakers on Monday just hours before deadline approved a budget bill that is less reliant on potential federal pandemic aid and contains reduced education and social programs cuts.
Assembly Budget Chair Phil Ting described the plan as imperfect but necessary to deflect devastating cuts to schools and the health care industry in light of the coronavirus pandemic.
“We could have done all the devastating cuts like some folks have asked about and maybe that would have helped us with Wall Street,” said Ting, D-San Francisco. “But this is a budget for Main Street and making sure the money that’s needed there is going there.”
The Legislature seeks to avoid deep cuts to schools and low-income Californians and assumes additional federal pandemic relief will reach the state by Oct. 1. If not, lawmakers are proposing to backfill the spending in various ways such as allowing schools to borrow, raising taxes on companies that carry out the state’s Medicaid program, eliminating certain commercial tax breaks and dipping further into the state’s reserves.
The proposal, approved in the Assembly by a 61-13 vote and in the Senate 29-11, is essentially a placeholder document passed to comply with a constitutionally mandated deadline requiring lawmakers to approve a balanced budget or lose their paychecks. The final version is expected to look much different as lawmakers’ plans to patch the state’s massive deficit vary from the Newsom’s.
Legislative leaders say they will continue negotiating in coming weeks with Newsom, who has until the end of the month to sign a finalized 2020-2021 budget.
To shield what his office believes could be a record-high deficit $54 billion hole, Newsom in May proposed cutting billions to social programs and education, reducing state worker salaries by 10% and suspending net operating losses for medium and large businesses for the next three years. The plan is also heavily reliant on the federal government, with Newsom arguing much of the state’s pandemic-induced fiscal pain can be relieved by Congress and the Trump administration.
“The federal government, we need you; these cuts can be negated and dismissed with your support. This is your moment,” Newsom pleaded while introducing his plan last month.
The governor’s proposal drew immediate criticism within his own party as two weeks later the Democratic-controlled state Senate responded with a vastly different spending plan.
During concurrent floor sessions Monday, Democrats painted their proposal as more compassionate and flexible than the governor’s.
“I’m impressed by this budget, I’m impressed by the cooperation between the two houses,” said state Sen. Bob Hertzberg, a Los Angeles Democrat. “This really is an appropriate, thoughtful approach.”
Over the last few months, a bipartisan chorus of lawmakers have complained about Newsom’s emergency spending and variety of executive orders taken during the pandemic. Lawmakers granted Newsom authority over a $1 billion relief fund in March but are pushing for more oversight now that California’s pandemic-related spending could exceed $8 billion.
As a result, the budget requires the Newsom administration to be more transparent when it comes to future pandemic spending.
The budget bill passed both chambers in bipartisan votes but received little support from the state’s minority party.
Senate and Assembly Republicans argued against the Democrats’ heavy reliance on deferrals, and in favor of making cuts. They warned shifty budgeting and suspending tax credits for businesses would bite the state in the long run, considering the deficit is likely to persist for several budget cycles.
Assemblyman Jay Obernolte, a Republican from Hesperia, vice chair of the Assembly Budget Committee, said the blueprint was patched together with “budgetary gimmicks” and encouraged his colleagues to negotiate in good faith with the governor.
“The Legislature has a constitutional role to play here in partnering with the executive branch,” Obernolte said. “I would also like to express my hope that we will continue to hold the line as negotiations with the governor proceed.”
State Sen. Jim Nielsen, a Chico Republican, complained that Republican lawmakers were largely left out of the truncated budget process and was skeptical about how money generated by ending business tax breaks would be spent.
“My fear is as usual that will be revenue that goes down a dark hole and in another year, we’ll be on the precipice of another deficit because we’ve not done the job required to get this budget long-term and multi-year under control,” Nielsen said.
Additionally, the Legislature is calling for the closure of two state prisons and some adjustments to the cap-and-trade program. The plan also slashes nearly $100 million from the state’s judiciary.
California’s finances have been shattered by the coronavirus pandemic, which ended the state’s 118 months of consecutive job growth and resulted in record unemployment.
With tax collections halted and deadlines extended, lawmakers and Newsom are attempting to craft a balanced budget with flimsy revenue projections and an uncertain amount of pending federal relief. The plan now goes to Newsom who can issue line-item vetoes or nix the entire plan, as former Gov. Jerry Brown did in 2011.
When asked Monday about lawmakers’ budget, Newsom said the sides were in the “throes of negotiation” and that he was pleased with recent progress.
“Deep respect, deep admiration for the task at hand,” Newsom said in a press conference. “Deep realization of the pressures the Legislature is under and all of us are under to meet the needs at a time when people demand more, not less, of their government.”
Newsom also complimented House Speaker Nancy Pelosi for proposing the $3 trillion aid and reiterated the need for federal help.
“I remain confident that something will happen at the federal level to help mitigate the impact of cuts at the state level,” Newsom said, adding he hopes the U.S. Senate will act on the relief package after the July 4 holiday break.