Governor Newsom Declares State Budget Emergency to Use Rainy Day Funds

On Thursday, Governor Gavin Newsom declared a state budget emergency to use emergency “rainy day” funds for the 2020-2021 budget and to help bridge the $54.3 billion deficit gap.

The rainy day funds were opened up to help pay for personal protective equipment (PPE) and other medical equipment needed to help fight the coronavirus, as well as prepare for more cases in the future, as well as help fund support for vulnerable populations in California.

Governor Newsom’s proclamation grants that about half the reserves of California’s Budget Stabilization Account can be sent to the General Fund for the 2020-2021 budget. The proclamation also stops any funds from going from the General Fund to the Stabilization Account in turn for an entire year. In all, up to about $8 billion in total can now be moved to the General Fund under a legislative bill.

When he announced the budget emergency on Thursday, Governor Newsom noted that the state still not doing enough to address the growing number of coronavirus cases in California. The Governor also noted that the pandemic is not close to being over.

“We are still in the first wave of this pandemic; we are not in the second wave,” said Governor Newsom.

Despite a state of emergency still being active and an approved budget awaiting finalization, the proclamation showed that lawmakers are still piecing together a final budget despite the next fiscal year beginning in less than a week. The formal budget deadline was June 15.

“A budget compromise is not easy,” said fiscal advisor Edward Malley, who has assisted several cities in California, Arizona, and New Mexico with budgets. “And opening up these funds was obviously a big chip to play in giving what was needed. California is most likely cutting things too, and this helps many programs stay alive.”

“And all of these resources they need, they’re coming from this block of funding that is the emergency fund.”

“Right now, they really need it. And they don’t want to cut those programs people need to get out of this intact.”

State lawmakers on Thursday generally agreed with the assessment.

“Learning from lessons of the last recession, it’s important that we don’t cut programs that our residents rely more heavily on during economic downturns,” noted Senator Holly Mitchell (D-Los Angeles).

In addition to the proclamation on Thursday, Governor Newsom gave praise to businesses that were delaying re-openings in favor of public health, most notably the delay of the re-opening of Disneyland, whose original reopening had been scheduled for later next month.

With the additional funds now available, both the Senate and Assembly are expected to vote on the revised budget plan by Friday for the Governor’s approval.