Newsom reveals new budget proposal, facing down $27.6bil deficit

California will have to cut billions in spending from last year’s budget just to shrink the projected deficit.

Governor Gavin Newsom announced that California will still face a budget deficit of $27.6 billion despite already cutting $17 billion in April. 

Newsom presented his updated budget proposal on Friday. 


The big picture: His revised state spending plan for 2024-25 proposes a total budget of $288 billion, with a $201 billion general fund.

  • It’s a far cry from last year’s budget, which totaled $310.8 billion. 
  • The deficit is due to tax revenue falling below projections used in the initial budget plan announced in January.
  • To address the shortfall, Newsom plans to declare a budget emergency and withdraw money from the state’s reserves, drawing $3.3 billion in the upcoming fiscal year and $8.9 billion the following year.

Driving the news: The budget negotiations with the Legislature are in the final stages, and lawmakers must pass a budget by June 15.

  • Initially, Newsom estimated a $38 billion shortfall, but the Legislative Analyst’s Office projected a $73 billion deficit. Newsom’s new figure indicates an increase since January.
  • To tackle the deficit, Newsom proposes additional budget reductions, amounting to nearly $45 billion in total reductions in addition to the $17 billion already cut.
  • The state’s reliance on tax revenue from high earners, tied to stock market fluctuations, contributes to California’s budget volatility.
  • Newsom aims to address a projected $28.4 billion deficit for the 2025-26 year in this year’s budget process.

Go deeper: His proposal includes cuts to programs such as the middle-class scholarship program, children and youth mental health initiative, and the expansion of new childcare slots.

  • Newsom also plans an 8% cut to state government operations, utilizing artificial intelligence and eliminating unfilled state positions to reduce spending.
  • The cuts are deemed necessary to align spending with lower tax revenue.
  • Previous budget actions already involved transferring billions from funding sources, cutting expenditures for various programs, and delaying spending on transit, education, and housing.

What they’re saying: “Even when revenues were booming, we were preparing for possible downturns by investing in reserves and paying down debts – that’s put us in a position to close budget gaps while protecting core services that Californians depend on,” Newsom said. “Without raising taxes on Californians, we’re delivering a balanced budget over two years that continues the progress we’ve fought so hard to achieve, from getting folks off the streets to addressing the climate crisis to keeping our communities safe.” 

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