California Legislature Announces 2020-2021 Budget Proposal

On Wednesday, the California Assembly and Senate announced a budget proposal that would largely be left intact without many significant cuts, putting it directly at odds with Governor Gavin Newsom’s budget proposal.

Senators and Assembly members don’t want Newsom’s budget cuts

The combined Legislative proposal, largely based on the Senate’s proposed budget late last month, suggests keeping the billions in education funding that had originally planned to be cut in Newsom’s plan by instituting deferred payments. While this means that many school districts will have to take out loans to await for the delayed funds, it would mean that the $8 to $9 billion in funding would come eventually. The same would go for proposed 10% cuts to the UC and CSU systems under Newsom’s plan.

Healthcare cuts proposed by Governor Newsom, including cutting a $112 program to give healthcare to illegal immigrants over the age of 65, were also reversed. The state Legislature, stating that they thought Newsom had overestimated by as much as $4 billion dollars on the cost of state health care programs, instead kept many programs, such as keeping programs to keep people out of nursing homes, add additional benefits for people, and adding immigrants with at least one child under 6 living in California to the states earned income tax credit list.

Both the education and health care cuts had been specifically targeted by Senators and Assembly members, being called “draconian” by some lawmakers.

“Our economy has been pummeled by COVID-19, but thanks to a decade of pragmatic budgeting, we can avoid draconian cuts to education and critical programs, or broad middle-class tax increases,” stated Senator Toni Atkins (D-San Diego).

Homeless services would also see an increase of funding, with $350 million being allotted for local governments for local homeless services and programs. State workers would also not see the 10% cuts that were proposed by Newsom under the Legislative plan.

The Legislature did give some proposed cuts, such as shutting down two of California’s prisons to save an undisclosed amount of money in jailing and building costs.

A crucial HEROES Act

Both the Newsom proposal and the Legislature’s proposal are dependent on the U.S. Senate passing the $3 trillion Health and Economic Recovery Omnibus Emergency Solutions Act (HEROES Act), as funds California would receive would make up most, if not all, of the $54.3 billion budget deficit.

Newsom’s plan is largely contingent, only if the HEROES Act passes. If it does, none of his proposed cuts would happen. The state Legislature’s plan assumes that the ACT will pass no matter what and does not give a contingency of budget cuts.

Newsom’s plan also takes into account that the state won’t know how much tax revenue it will exactly receive due to the three month delay in tax filings due to the coronavirus pandemic. Based on what the U.S. Congress decides, Newsom’s plan would include a later revised budget session where a final budget would be put into place following all funds, both federal and state, being accounted for.

Governor Newsom himself has acknowledged the hard decision in cutting the budget down.

“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,” explained Governor Newsom last month. “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.”

The Legislative plan also acknowledges the state tax delay and would also alter the budget in case of reduced funds.

“All the budget plans being discussed acknowledge the possibility that more difficult cuts will be necessary,” noted Assembly Speaker Anthony Rendon (D-Lakewood) on Wednesday.

Other revenue sources and a rapidly approaching deadline

Other sources of generated or projected income are also possible for the budget, such as revenue from legalized sports betting should the state approve it this year and using any remaining surplus and rainy day funds to stretch the reduced budgets of the coming years.

“This all needs to be decided pretty soon,” added former auditor and accountant Travis Welsh, who has helped many cities and town overcome budget deficits since the 1990’s. “The budget deadline is big for anyone, but in California it’s critical. They now have a very short time frame for the Governor and the [state legislature] to come to an agreed budget, or those lawmakers won’t get paid by law.”

“The Senators and [Assembly members] aren’t budging on getting rid of the proposed cuts, so they’re going to need that time to work it out.”

“From what I’ve seen personally in the past in situations like this, there will be some cuts, but not in the one or two most important areas to them, so that probably means that education and healthcare will be safe from any cuts. Everything else though, it’s up in the air. The Governor will have some of his cuts in there in the compromise.”

“June is going to be a little tense in California.”

The current budget deadline is June 15th with the 2020-2021 budget to begin on July 1st.