Gov. Newsom Cuts $6.1 Billion in Revised State Budget with a $54.3 Billion Deficit

On Thursday, Governor Gavin Newsom introduced a revised 2020-2021 state budget proposal that would include over $6 billion in cuts.

$6.1 billion in cuts, a $54.3 billion deficit

Under the May budget revision, $6.1 billion in programs and spending increases would be cut. The largest suggested cut would come in the form of all state employees, including the Governor, receiving a 10% pay cut across the board beginning on July 1st. If state workers don’t agree to this in collective bargaining, furloughs will be put into place instead.

The projected $6 billion surplus in January would also be put into use in the next budget to weigh down the $54.3 billion deficit. The $16 billion rainy day fund would also be used during the next three years, along with using $8.8 billion in reserve funds and $4.1 in special funds for the 2020-2021 budget. For taxpayers, besides state services possibly being cut due to furloughs, they would be limited to only $5 million in credits a year.

Few programs would gain money under the budget, and in those cases, they are coronavirus related. Most notably, wildfire and other disaster prevention programs would get $200 million. This is largely due to an increased wildfire threat and prisoners not being allowed to help fight fires due to coronavirus restrictions, necessitating the need for more wildfire firefighters and equipment.

Governor Newsom noted that his budget plan is not only for the 2020-2021 budget, but state budgets leading until the end of his term as well.

“We are not arguing to solve a $54.3 billion shortfall overnight. We are looking not only at the current fiscal year and next year’s budget year, but we’re looking at a multi-year strategy to work through this budget deficit,” said Governor Newsom in Sacramento on Thursday. “I know this is the last thing that our partners want to hear, but unfortunately, we’re in a position where it’s required of all of us. And by the way, including me and including my entire staff.”

“In almost a blink of an eye the state is in a completely different position.”

Limited federal assistance

The $54.3 billion deficit, caused by the governor’s statewide stay-at-home order and the economic fallout in the wake of the coronavirus pandemic, is also expected to be partially combated by federal aid. Spending for schools in the revised state budget would be slashed by $7 billion, but $4 billion in anticipated federal COVID-19 school funding would have California ultimately only cut $3 billion.

However, federal dollars would not cover or partially cover most proposed cuts. For example, a $112 program to give healthcare to illegal immigrants over the age of 65 was cut. Other healthcare and Medicaid expansion programs were cut as well, with no current federal program to fill the gap.

Higher education cuts of 10% in the CSU and UC systems also have no federal protections.

California and 4 other Western states have asked for a combined $1 trillion from the federal government, but so far Congress has not enacted any part of the plan.

Public reaction to the cuts

The Governor’s proposed cuts have been met with frustration but also acceptance by many unions, workers, and government watchdog groups.

“No one saw the coronavirus coming,” noted former auditor and accountant Travis Welsh, who helped several towns in California, Oregon, and Montana overcome budget deficits following the Dot Com crash and the Great Recession. “During the Great Recession we had half the country fighting against bailing out banks and car companies because of what they did. But coronavirus is different. You can argue for making a bigger rainy day fund or reaction time to the virus, but ultimately, there’s not much to have done there. You can argue now for a quicker economic reopening, but the fact of the matter is that there is a huge deficit and the biggest thing you can blame is a virus, and that doesn’t do anyone any good.”

“These cuts are going to make many people frustrated. In California’s case, that especially means government workers. But what else can you do? There is a smaller tax base with less people working and many businesses closed. And there are increased state expenses, like paying 4.6 million California citizens their unemployment.”

“There’s just not a lot to mitigate here, and most people know that.”

Notably, California’s 883,408 state and local government employees have not been subjected to pay cuts as the 4.3 million private sector jobs were with the governor’s official state shutdown order 8 weeks ago.

Service Employees International Union (SEIU) Local 1000 President Yvonne Walker noted in a video that there is “pain” coming in either the form of pay cuts or furloughs, but also noted acceptance of the situation.

“We can call the bargaining team together and we can figure out the equivalent of what that 10% represents and try to negotiate something,” explained Walker. “Yeah, there might be a little pain involved but it won’t be the same as two furlough days.”

The revised budget now goes to the California legislature for revisions and approval, the due date of which is set for June 15th. If a budget isn’t agreed on by then, all state lawmakers will have to legally forfeit their pay.