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Wednesday, June 5, 2024 | Back issues
Courthouse News Service Courthouse News Service

California’s fiscal watchdog sees positive signs in deficit reduction

Despite an overall cut in the deficit, the state analyst says future ballot measures could negatively affect the budget.

SACRAMENTO, Calif. (CN) — California Governor Gavin Newsom’s revised budget has helped some of the Golden State’s budget woes, though financial problems continue to loom on the horizon, the state Legislative Analyst’s Office said Friday.

Newsom’s new 2024-25 budget, released two weeks ago, cut what he said was a $38 billion deficit down to $27.6 billion. However, the analyst’s office earlier this month said that Newsom actually fixed a $55 billion deficit. The difference comes from how the governor’s and analyst’s offices determine school and community college spending under the law.

The analyst on Friday also addressed future fiscal years the governor discussed when he revealed his May budget. Anticipated budget deficits of $30 billion each year over fiscal years 2025-26, 2026-27 and 2027-28 have dropped due to pulling back on one-time money allocated but not yet spent and implementing ongoing reductions. The deficit for 2025-26 is now estimated at under $5 billion, with the shortfalls over the following two years hovering around $10 billion.  

These reductions would leave more reserves the state could use to cover those deficits.

“Given this, we recommend the Legislature maintain a similar overall structure to the governor’s approach in the final budget package,” the analyst office wrote.  

Lawmakers must pass a budget by June 15.

Newsom has faced some pushback for the proposed budget cuts, which include a reduction of $5 billion to programs like the multiyear childcare slot expansion plan and foster care permanent rates, $1 billion in provider rate increases in the Managed Care Organization package and $325 million to the multifamily housing program.

The group Children Now slammed Newsom’s May budget when he revealed it.

“After already threatening the safety of California’s foster youth by proposing the elimination of … (the 24/7 in-person helpline), the administration doubled down in today’s May revise by proposing even more cuts to child welfare, as well as untenable cuts to childcare, home visiting, TK-12 education, mental health and access to health services,” Children Now said in a May 10 statement.

Despite the reductions in future deficits, the analyst’s office said fiscal storm clouds remain.

The office said its financial forecast relies on all of Newsom’s budget revisions becoming a reality. Additionally, California’s fiscal stability remains uncertain because of expected voter initiatives expected to appear on the November ballot.

“These proposals specifically could present downside pressure on the budget picture,” the analyst wrote.

While not mentioned by name by the analyst’s office, the Taxpayer Protection and Government Accountability Act could play havoc with government revenue. Its supporters have said the act would give voters the final call over new or increased state taxes, as they would require a statewide vote to pass. Additionally, any new or increased taxes passed after Jan. 1, 2022, would be affected by the act.

That’s caused consternation among opponents of the act, who argue it’s already led to indecision among local governments that now are unsure of future revenue. Opponents also say the act would remove a local jurisdiction’s ability to impose fees, including for traffic offenses or overdue library books.

Newsom and the Legislature hope the act never makes it to voters. The issue was heard earlier this month before the state Supreme Court, which could decide to pull the measure from the ballot.

Opponents of the act have argued that it’s an improper revision of the state constitution and should be removed because it affects an essential power of the government.

The high court is expected to rule by June 27, the last day an initiative can qualify for the November ballot.

Categories / Economy, Government, Regional

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