California Democrats Reach Budget Agreement, Republicans Excluded

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The governor said the plan will reduce the deficit between $12 billion and $18 billion.

Faced with a looming deficit, California Gov. Gavin Newsom announced March 20 an agreement with Senate and Assembly leaders to address some of the state’s budget shortfall, but Republicans said they were left out of discussions.

Referencing reports of alleged backroom deals and secret arrangements involved with a new fast-food law set to take effect April 1, one critic said he’s hopeful the budget process is more transparent.

“Apparently, there’s a budget deal with no details,” Assemblymember Vince Fong said in a press release March 20 after the news was announced. “Hopefully, it is not covered by a [non disclosure agreement]. Californians demand transparency.”

No specifics were provided, but the governor’s press release said the plan will reduce the deficit between $12 billion and $18 billion.

“Thanks to leadership in the Assembly and Senate, California is stepping up with a balanced approach that will take a significant chunk out of the projected shortfall,” Mr. Newsom said in the press release. “Despite the uncertainty due to the federal tax deadline delay last year, historic reserves and fiscal responsibility will assure a balanced budget that meets California’s needs.”

The exact amount of the deficit for the fiscal year beginning July 1 has remained a point of contention, with the governor saying it is between $38 billion and $53 billion, and the state’s Legislative Analyst’s Office estimating $73 billion.

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With revenues failing to meet expectations in January when the first tax collections of the year rolled in, the deficit could grow, according to the analyst’s latest deficit update published February 20.

Acknowledging the fiscal dilemma, some lawmakers said urgent action is needed.

“The deficit is serious and it’s grown by billions since January, which is why we must move with speed to shrink the shortfall immediately,” Senate President pro Tempore Sen. Mike McGuire said in the governor’s press release. “The quicker we make tough decisions, the better prepared we’ll be to continue our work on a comprehensive budget to protect our progress.”

California state Senate President Toni Atkins (L), D-San Diego, hugs Sen. Mike McGuire, D-Healdsburg, after he was named the successor to Ms. Atkins at the Capitol in Sacramento, Calif., Aug. 28, 2023. (Rich Pedroncelli/AP Photo)
California state Senate President Toni Atkins (L), D-San Diego, hugs Sen. Mike McGuire, D-Healdsburg, after he was named the successor to Ms. Atkins at the Capitol in Sacramento, Calif., Aug. 28, 2023. (Rich Pedroncelli/AP Photo)

A group of Senate Democrats, including Mr. McGuire, released a budget proposal March 13 dubbed “Shrink the Shortfall” with a combined $17 billion in solutions. Less than 20 percent of the reductions are spending cuts, with the remainder a mixture of deferrals, delays, and borrowing. It is unclear if the plan agreed to by the governor is the same as what was released by the senators or if amendments were made.

The plan is to borrow about $5 billion and tap the so-called “rainy day” fund, leaving about $13 billion for future needs.

Some, including legislative analysts and researchers at the Pacific Research Institute—a public policy think tank headquartered in Pasadena, California—have argued in recent weeks that more cuts are needed to close the gap.

“The unwillingness to cut spending demonstrates a complete misunderstanding of the problem, which is why the Senate plan to ‘shrink the shortfall’ is destined to fail,” Wayne Winegarden and Tim Anaya of the research institute wrote March 18 on the organization’s website. “The budget games the Senators are proposing only make sense if current expenditure levels were affordable and the shortfall was a one-time event. Neither condition holds.”

Blaming the existing deficit on excessive spending, the authors suggested that problems will continue to worsen if the Legislature fails to recognize the situation.

“Expenditure controls are necessary because the current level of state spending is simply unsustainable,” the authors wrote. “The longer the legislature denies this reality, the lengthier the budget crisis will be.”

New Assembly Speaker Assemblymember Robert Rivas said in the governor’s press release that he recognizes the challenges ahead and is looking forward to crafting solutions.

“The Assembly is committed to a deliberative, transparent budget process that protects hard-working Californians,” Mr. Rivas said. “There are tough choices on the horizon, which is why our process is so critical.”

While the Democrats are highlighting their plan, Republican lawmakers said they were left out of the process.

“I am disappointed in this administration on behalf of the people of California,” state Sen. Roger Niello, senate budget committee vice chair, said in a March 20 press release reacting to the budget agreement. “Not allowing public discussions or different viewpoints to weigh in is a disservice to the millions of Californians we represent and erosion of democracy.”

He said the public has a right to know how policies are crafted and decisions are made, suggesting the status quo creates uncertainty and leaves some perspectives excluded.

“The budget process has been degraded in the last several years with unilateral decision-making happening behind closed doors by one political party,” Mr. Niello said. “The fact remains that the state is facing a major deficit that has continued to grow, and this process should be open, transparent, and deliberative.”

Mr. Newsom’s office did not respond to requests for comment on deadline.

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