SACRAMENTO, Calif. (CN) — California’s top leaders said Wednesday that they’ve agreed to some $12 billion to $18 billion in “budget solutions” — fixes that will help address this year’s significant deficit.
The state faces an estimated $38 billion to $73 billion deficit, according to Governor Gavin Newsom’s office and the Legislative Analyst’s Office, respectively. Lawmakers have been quick to say they wanted swift action. Last week, Senate Democrats announced their “shrink the shortfall” plan, which includes reductions in programs, shifting money and funding delays in certain areas.
Wednesday’s announcement indicates that the Legislature will act next month to reduce the budget shortfall. Few details were released.
The state budget must be passed by June 15.
“Thanks to leadership in the Assembly and Senate, California is stepping up with a balanced approach that will take a significant chunk out of the projected shortfall,” Newsom said in a statement. “Despite the uncertainty due to the federal tax deadline delay last year, historic reserves and fiscal responsibility will assure a balanced budget that meets California's needs.”
The analyst’s office last year pointed to delayed tax receipts as one reason officials discovered the shortfall late in the year. Residents in most California counties could delay their tax returns by months due to the storms that ravaged the state in 2023. It wasn’t until November that the analyst’s office foresaw the massive deficit crunch.
The office recently revised its estimate, saying the deficit is closer to $73 billion since tax revenue came up short.
Revealing his budget in January, Newsom said he was more optimistic. He estimated the deficit was closer to $38 billion.
Using the governor’s numbers and including the possibility of the analyst’s upward revision, the Senate’s plan calls for a likely deficit of between $38 billion to $53 billion. Its $17.1 billion in solutions, along with the possible use of $12.2 billion in rainy day funds, would reduce the deficit to $8.6 billion to $23.6 billion.
“The deficit is serious and it’s grown by billions since January, which is why we must move with speed to shrink the shortfall immediately,” said Senate President pro Tempore Mike McGuire in a statement. “The quicker we make tough decisions, the better prepared we’ll be to continue our work on a comprehensive budget to protect our progress.”
The analyst’s office has recommended early action — using financial reserves, shifting costs and reducing or pulling back temporary spending — to address the deficit.
Withdrawing from reserves and shifting costs can occur at any time, but can only be used once. Reducing one-time and temporary spending would mean legislators would have more options if future budget problems arise.
“I appreciate our partnership with Governor Newsom and Pro Tem McGuire to finalize this preliminary and initial budget package in early April, which is an important first step,” Assembly Speaker Robert Rivas said in a statement. “But the Assembly’s budget work continues, including more than two dozen budget and oversight hearings scheduled next month. There are tough choices on the horizon, which is why our process is so critical.”
Assemblymember Jesse Gabriel — an Encino Democrat and chair of the Assembly’s Budget Committee — said last week that lawmakers understand the deficit’s magnitude. Some 25 budget-related hearings are set for next month in what he called a deliberate and transparent process that includes public comment.
“Crafting the budget is a team sport,” he told the media in a Zoom call.
“In this type of environment,” he added moments later, “we have to consider everything.”
Subscribe to Closing Arguments
Sign up for new weekly newsletter Closing Arguments to get the latest about ongoing trials, major litigation and hot cases and rulings in courthouses around the U.S. and the world.
