SACRAMENTO, Calif. (CN) — Steering a suddenly divebombing economy in just his second year in office, California Governor Gavin Newsom revealed a lean revised budget Thursday and signaled the end of the state’s record stretch of economic growth.
To begin slicing into what his office believes could be a record-high deficit, Newsom wants to slash state worker salaries by 10%, drain the state’s $16 billion rainy-day fund over the next three years and continue pressing Congress and the Trump administration for relief.
“These are not ordinary times, and as a consequence this will not be an ordinary budget presentation,” Newsom said somberly.
Thursday’s $203 billion budget represents a dramatic turnaround from the stocked $222 billion spending plan the Democratic governor rolled out in January. The revised document carries a 9% drop in general fund spending and 5% overall, along with a potential 13% decrease in K-12 funding.
The initial version assumed tax collections would continue their torrid pace and banked on a $5.6 billion surplus. Expecting wiggle room, Newsom in January proposed addressing the state’s homelessness crisis by spending billions on housing and mental health services, expanding subsidized medical care to undocumented immigrants and $523 million to help pay for a minimum wage increase.
Not only did Newsom propose the largest budget in state history on that January morning when most of the world had never heard the word “Covid-19,” he said the state would additionally ask voters to pass a $4 billion bond to ward against the ongoing effects of climate change.
Four months later, the budget-busting pandemic and an eight-week statewide lockdown have combined to torch Newsom’s vision, halt 118 months of consecutive job growth and jeopardize the record surplus Newsom inherited in 2019.
According to Newsom’s financial team, Thursday’s so-called “May Revise” assumes the state has abruptly plunged into a $54 billion hole. The tables have quickly turned in California, Newsom acknowledged.
“We were regaling folks about our economic growth, incredible economic vibrancy and economic output the state was enjoying,” Newsom said. “Of course, that was January.”
California, unlike the federal government, is of course required to pass balanced yearly budgets and Newsom along with other governors are turning to Washington for help.
Newsom and California’s congressional delegation have been clamoring for more financial aid, insisting federal relief is needed to fill budget gaps and forgo massive layoffs and preserve public safety. Earlier this week, a collection of lawmakers and governors from Western states told congressional leaders that their states, cities and counties will need $1 trillion in federal money to weather the economic downturn created by the coronavirus pandemic.
House Democrats are pushing a new $3 trillion coronavirus relief bill that could deliver California up to $50 billion in federal funding. Newsom said Congress and President Donald Trump could prevent California from making devastating cuts in areas like education and health care.
“We have been making crystal clear over the course of the last many weeks: these are cuts that can be triggered and eliminated with the stroke of a pen,” Newsom said. “The federal government, we need you; these cuts can be negated and dismissed with your support. This is your moment.”
Newsom’s updated spending bill now heads over to lawmakers, who have until June 15 to approve it via majority vote.
During a 75-minute press conference, Newsom rattled off the factors contributing to California’s budget woes, namely “jaw-dropping” unemployment and sweeping revenue losses that have contributed to the $60 billion swing in fortunes.
Since California counties began sheltering in place in March, 4.6 million residents have filed jobless claims. Newsom predicted unemployment rates could peak at 24.5% this calendar year and slowly decrease to 10% by the end of 2023.