On Monday, Governor Gavin Newsom signed the $202.1 billion state budget, confirming state spending for the 2020-2021 fiscal year.
A new budget dependent on federal funding
The signing of the 2020 Budget Act culminated a six month process that initially had California being in the black financially. But a $6 billion surplus budget proposal by Newsom in January quickly fell through following the coronavirus and the subsequent economic downturn. With heightened health and unemployment insurance costs meeting a significantly reduced tax base, a deficit of $54.3 billion quickly formed by March.
Lawmakers quickly had to come out with revised budgets. Governor Newsom came out with a budget proposal last month promising cuts across many departments and the halt of many projects. The legislature quickly formed their own, aiming to keep spending up with a reliance on federal HEROES Act money that is supposed to be distributed among states by October if ultimately passed.
But on Monday a compromise was signed, with the budget currently expecting the HEROES Act to be passed and keep funding for many institutions, but with cuts to be added should the funding fall through.
“In the face of a global pandemic that has also caused a recession across the world and here in California, our state has passed a budget that is balanced, responsible and protects public safety and health, education, and services to Californians facing the greatest hardships,” said Governor Newsom on Monday after signing the budget. “I thank Pro Tem Atkins, Speaker Rendon and both houses of the Legislature for their continued partnership and leadership during this challenging moment in our state’s history.”
Possible budget cuts
If the HEROES Act is not passed, California will have to enact many difficult cuts. State Colleges and Universities stand to lose 10%, or $1.7 billion. $248 million in housing programs would also be lost. as would 10% of state employee pay across the board, saving $2.8 billion a year. Courts and social programs would also see reduced funding.
Many new taxes and other avenues of collecting money to fill the gap are also enacted in the bill. $8 billion will be directly moved from the state’s “rainy day” fund to the 2020-2021 general fund. Tax increases were also announced. Public school funding also saved the state funding by initiating the unusual process of deferred payments. While public schools will see state money, in some cases increased state money, the payments will be delayed and only gradually paid out, forcing many school systems to take out temporary loans. Under the budget, teacher layoffs will be prevented, but no raises or cost-of-living raises will be made for at least a year.
Health care was also stalled. No cuts were made as the funds were restored by the legislature, but some programs, such as expanding state medicare to those over 65 who are illegal immigrants, was delayed for the future. Illegal immigrants did see a few breaks though, such as an expansion of California Earned Income Tax Credits for children of illegal immigrants.
Some funding did go up in other areas as well. Most notably, the Special Fund for Economic Uncertainties, which covers unforeseen COVID-19 and economic issues in the next year, saw a funding amount of $2.6 billion. Many smaller programs also saw passage due to their small size and big impacts, like the Paradise Irrigation District getting $7.3 million to help the area recover even more from the 2018 Camp Fire.
Mixed reaction from California lawmakers
Some legislators were concerned at the speed of which the budget was put together due to the Legislature having two months off due to the coronavirus pandemic and only approving it late last week.
“The reason we have a legislative process is so we can have those debates in a public forum, and we’re not doing that here,” said Assemblyman Jay Obernolte (R-Big Bear) last week. “We’re rushing through this.”
However, with the due date of July 1st being so close and many fearing what operating without a budget would bring, legislators agreed to a lower budget, with Newsom ultimately agreeing to the compromise budget on Monday. Several important areas, such as health care, emergency services, and education, were secured by lawmakers, with many other areas be left to the now-necessary chopping block.
“We could have made more cuts,” announced Assemblyman Phil Ting (D-San Francisco) in a speech last week. “We could have had a budget that was better for our bond rating. But we decided that it was more important to ensure that schools remain held harmless, more important to make sure we didn’t cut health care.”
The 2020-201 budget comes into effect on Wednesday, July 1st. The CARES Act, if signed, is due to send federal money to California by October 15th.
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