Gov. Newsom Unveils $297 Billion Budget Proposal With $22.5 Billion Deficit

California Governor Gavin Newsom presented a $297 billion 2023-2024 budget plan on Tuesday, with a projected deficit of $22.5 billion.

In the last several years, California has seen large budget surpluses, with $38 billion reported in 2021-2022, and $97.5 billion being reported for the 2022-2023 budget year. However, with the post-COVID economy finally stabilizing, and the state losing both businesses and population in recent years, state revenues swung down as many had predicted, leading to a leaner budget.

In a statement on Tuesday, Newsom noted that funding would continue on as usual to core Californian services, as well as through education by continuing free lunch for all student programs and bringing in universal kindergarten. Homelessness funding, housing programs, Medi-Cal expansion, cutting drug costs, improving mental health programs, climate change programs, combatting drug use such as fentanyl, combatting crime, and supporting economic developments and small businesses were also mentioned in having continued funding.

“With our state and nation facing economic headwinds, this budget keeps the state on solid economic footing while continuing to invest in Californians – including transformative funding to deliver on universal preschool, expand health care access to all and protect our communities,” Governor Newsom said on Tuesday. “In partnership with the Legislature, we’ll continue to prioritize the issues that matter most to Californians while building a strong fiscal foundation for the state’s future.”

While most major programs did avoid large cuts in the proposal, there was an overall reduction in climate programs, despite Newsom saying otherwise. Some money was quickly shifted to flood programs following major floods and rainfall striking California since late December. $135.5 million was put toward urban flood risk reduction, with another $40.6 million going toward levees across the state. $25 million will also go toward reducing flood risk reduction in the Central Valley.

“What’s top of mind is flood investments,” added Newsom. “I’ll be off after this, down to the Central Coast.”

Drought was also a major factor on the budget, with an increase of $125 million going to a drought contingency fund and $31.5 million going to water rights. More funding also went to groundwater recharge projects and other water projects.

However, big cuts were also seen in the budget. $24 million was slashed to a water resilience project with a $270 million delay to the same project. Concurrently, a forever chemical cleanup project saw a major cut of $70 million. Other water projects, such as a water refilling project, was cut entirely, with water recycling and solar panel programs being cut severely.

Zero-emission vehicle programs also saw an 11% cut of $1.1 billion, with another $3.1 billion in funding for similar programs being delayed. Another $4.3 billion of the zero-emission program would also have a shift of funding to save it from being cut, moving from the general fund to a separate fund that polluting companies pay into.

Despite this, Newsom said on Tuesday that “We’re keeping our promises,” and that the state will still have $35.6 billion in reserves after the budget. At the press conference, Newsom also pledged not to touch the reserves and wanted to wait until May to make any final calls on the budget when the budget revision is due.

“We’re not touching the reserves because we have a wait and see approach to this budget,” continued Newsom. “We are in a very volatile moment. The budget will be revised in May when there’s more clarity.”

Mixed reaction to Newsom’s budget proposal

Democrats generally approved of the proposed budget on Tuesday, as no major cuts were recorded and that there is still enough room to make necessary adjustments to it.

“We funded things at such record levels, and a lot of the programs that we funded haven’t even gotten going yet, so we still have room to make some adjustments if needed,” noted Senator Nancy Skinner (D-Berkeley). “I’m very optimistic because we’re in good shape.”

Other groups, such as the California Retailers Association (CRA) also gave positive notes on the budget proposal, specifically noting that more funding was going towards retail theft enforcement and retail protections.

“CRA applauds Governor Gavin Newsom for recognizing in his 2023-2024 state budget proposal the importance of supporting business in uncertain economic times including the prioritization of protecting the safety of retail employees, customers and neighborhoods from growing organized retail crime and retail theft rings,” said the CRA in a statement.

“We were proud to work with the Governor last year on his Real Public Safety Plan, which included funding for the ORC Taskforces, increased the number of task forces from three to five, included funding for dedicated ORC prosecutors for each task force and established local law enforcement grants for retail theft.”

The California GOP, meanwhile, was up in arms over the proposed budget, charging Newsom with having more freewheeled spending in previous years, with the spending not solving or improving any of the major crises today.

“Despite billions of dollars in increased spending in recent years, California is still juggling multiple crises today, from homelessness to wildfires, inadequate water storage, an outrageous cost of living and failing schools,” explained California Republican Party Chairwoman Jessica Millan Patterson. “Now with a massive budget shortfall projected, it’s time for Gavin Newsom to finally get serious about smarter spending to resolve the many issues that are plaguing our state and driving long-time residents away. Californians would be best served by this failing governor working with Republicans to find real solutions to our state’s biggest problems. Unfortunately, worrying about states like Texas and Florida seems to be more important to him than worrying about the state he was actually elected to lead.”

Environmental groups also denounced the cuts and delays to the budget, charging the Governor with ignoring some environmental needs in the state.

“It seems things like expanding electric vehicles in the state are important until they suddenly aren’t,” Ellen Fielder, an environmental lawyer, told the Globe on Tuesday.

Senate and Assembly budget proposals will be submitted later this year, with a budget revision by the Governor expected in May.