Newsom’s budget proposal would cut deficit below earlier projections

Republicans are pushing back to Newsom’s proposal, which would see the state tap into its rainy-day fund.

Staring down an estimated $68 billion deficit by the nonpartisan Legislative Analyst’s Office, California Gov. Gavin Newsom announced a spending plan Wednesday that would put the state’s deficit at $37.9 billion. 

In his announcement, Newsom painted his projections as more accurate than the LAO’s, in part due to a likely rebounding stock market. 


The big picture: Newsom revealed a $291.5 billion state spending plan that will be discussed with the Legislature until the new fiscal year starts on July 1. 

  • Newsom’s plan would see the state take $13 billion from reserves, including $12.2 billion from the rainy-day fund. That would require him to declare a budget emergency. 
  • He is also looking to cut $8.5 billion in spending, which would include a $3 billion decrease from climate programs and $1.2 billion from housing programs. 
  • Education spending would be helped by a $5.7 billion withdrawal from the state’s special savings account for public education, avoiding a cut. 

Go deeper: Newsom’s proposed climate cuts include $23.5 million for a pilot program to deploy zero-emission trucks, as well as $7.3 million for a program to give grants to zero-emission vehicle manufacturers. 

  • While he has set a 2035 deadline for requiring all new vehicles in the state to be electric, Newsom’s proposal would delay $600 million in spending to 2027-2028 for programs that would help people replace their gas-powered cars with electric vehicles. 
  • Newsom is also asking lawmakers to change the state’s new $25 an hour pay for healthcare workers to depend on how much state money is available. 

What they’re saying: “We just are a little less pessimistic than they are about the next year,” Newsom said, referring to the LAO. 

  • Asm. Vince Fong (R–Bakersfield), the Vice Chair of the Assembly Budget Committee, said it is too soon to use the rainy day fund, adding that the state’s unsustainable spending needs to be dealt with. 
  • “Instead of solving the deficit, the Governor continues to wage a war on California’s energy sector causing Californians to pay higher gas prices. Water Infrastructure is desperately needed, yet not a drop of new water storage has been added,” Fong said. “Making splashy headlines and deflecting doesn’t solve the state’s fiscal crisis.” 
  • Fong urged Newsom to call for a special session of the Legislature and to declare a fiscal emergency. 
  • “After years of ignoring Republican warnings about unsustainable spending, legislative Democrats and Gavin Newsom now have to deal with a massive deficit,” said Assembly Republican Leader James Gallagher (R–Yuba City). “It’s time to bring California’s budget under control, but not through accounting gimmicks or cuts to education. Our government needs to get back to basics and stop wasting tax dollars on an ineffective and unaccountable bureaucracy.”
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