Gov. Gavin Newsom is expected to release his proposed budget for 2024-2025 this week. You can almost hear the collective nail biting. With an estimated $68 billion shortfall, the governor has already ordered state agencies to freeze spending. Cuts are coming next.
"We knew there was going to be a deficit, but the magnitude of that deficit, I think, took everyone by surprise," Troy Flint, a spokesperson for the California School Boards Association, told KCRA.
That’s partly because of the extended tax filing deadlines administered by the federal and state governments in response to winter storms. The Legislature knew the economic situation was becoming bleaker when it passed the 2023-24 budget, but it had no idea just how bad things would get.
"Republicans cautioned that this level of spending would lead to greater deficits, and it would be more prudent to show restraint. Unfortunately, the majority party ignored those warnings," State Sen. Roger Niello (R-Fair Oaks), the budget committee vice chair, told CBS News.
Republicans point to what they call irresponsible spending initiatives, including a new law that expands Medi-Cal insurance to undocumented immigrants. Assemblymember Bill Essayli (R-Corona) has authored a bill that would rescind the funding.
The LAO has recommended that the governor declare a fiscal emergency and dip into reserves to address the shortfall. Legislative analyst Gabriel Petek also suggested the state recalculate its Prop 98 funding obligation to schools and community colleges. Schools have $19 million less in the general fund than was estimated last June.
While local governments were largely spared last time around, there is worry that they won’t be as lucky this time. Cal Cities has urged the state to continue the course and protect core services despite the poor outlook.
Cleary, there is pain coming. But lawmakers have expressed optimism that the shortfall can be addressed while preserving most school funding. A spokesman for Newsom has also said the governor’s budget will protect “vital services and public safety.”
Once Newsom releases his blueprint, negotiations with lawmakers will kick off, continuing through June. The next budget year begins July 1.
For a closer look at the proposal, catch this webinar with California Finance Director Joe Stephenshaw on January 17, 2024, from 11 a.m. to 12 p.m., hosted by the California Chamber of Commerce. Pre-registration is required.