SACRAMENTO, Calif. (CN) — The California Legislature passed a highly touted “early action” bill Thursday, sending legislation to the governor that Democrats have said will reduce the deficit by some $17 billion.
Assembly Bill 106 — written by Assemblymember Jesse Gabriel, an Encino Democrat and chair of his chamber’s Budget Committee — affects the state’s 2022-23 fiscal year budget. It reduces the deficit by pulling back money already designated but not yet spent, borrowing money, delaying other expenses and shifting costs.
The bill moved quickly after Governor Gavin Newsom and top Democrats announced their plan last week to shave billions from the deficit. It passed a procedural vote in the state Senate that day and was voted on Thursday first by the Senate, followed by the Assembly.
“This bill takes a significant step toward a balanced budget in June,” state Senator Scott Wiener, a San Francisco Democrat and chair of his chamber’s Budget and Fiscal Review Committee, said Thursday.
The Legislature must pass a full budget by June 15.
Senate President pro Tempore Mike McGuire, a North Coast Democrat, called this a tough budget year — a cry that’s been made since January. Since the governor and Legislative Analyst’s Office revealed their deficit estimates, the projection has risen by $15 billion. And lawmakers haven’t yet seen what’s termed the May revise, the next version of the budget that’s made after April’s tax receipts start rolling in.
“Sitting around wringing our hands doesn’t get the work done today,” McGuire said.
The total deficit includes shortfalls in both this fiscal year’s budget and the next fiscal year. Lawmakers didn’t learn about the deficit until late last year, as many Californians were allowed to file their taxes months after the April deadline. Officials have pointed to those delayed tax receipts, as well as a tightened monetary policy by the Federal Reserve and a slowdown in the state’s economy as some reasons for the financial gap.
Receiving the bill Thursday in the Assembly for a final vote, Gabriel echoed McGuire’s remarks, saying it wouldn’t be their final move on the budget. He called the early action bill a first step.
Assemblymember Akilah Weber, a La Mesa Democrat, said the bill addressed a large portion of the deficit. It also sends a signal to voters that lawmakers can bridge the financial gap without cutting services.
“This will continue to be a tough conversation,” Weber said.
Republicans in both chambers opposed the bill.
State Senator Roger Niello, a Fair Oaks Republican and vice chair of the Budget and Fiscal Review Committee, called the budget strategy one of delays and deferrals. He also chided the Newsom administration’s deficit estimates, calling it “budgeting with optimism.”
Newsom has estimated the budget deficit at $38 billion, while the analyst’s office set it at $73 billion.
According to Niello, the analyst is typically more accurate in its estimates. He said revenues likely will drop, as California recently became the worst state for unemployment.
State Senator Brian Dahle, a Bieber Republican, also opposed the bill.
“This budget is nothing but smoke and mirrors, backroom deals done by the party in control,” he said.
Dahle said his constituents, who live in a massive district that comprises the northeast part of California, are concerned about the cost of living, housing and health care. Those issues are what lawmakers should focus on.
Assemblymember Vince Fong, a Bakersfield Republican and vice chair of his chamber’s Budget Committee, shared those concerns. The deficit fixes include borrowing from one fund to pay for another, which will lead the state to repay itself with interest over the years.
It also employs a budgeting trick that delays paying state workers for a few days later this year, pushing those payments from one fiscal year into the next.
The bill calls for $3.6 billion in reductions to one-time funding, $5.2 billion from revenue and borrowing, $5.2 billion in delays and deferrals and another $3.4 billion in moving costs from the general fund to other funds.
Lawmakers also intend to tap into half of the state’s rainy day fund, about $19 billion.
"I thank our legislative leaders for their partnership in taking this major step to address the shortfall with a balanced approach that meets the needs of Californians and maintains a strong fiscal foundation for the state’s future," Newsom said in a statement. "We are able to meet this challenge thanks to our responsible fiscal stewardship over the past years, including record budget reserves of close to $38 billion."
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