Faced With Record Deficit, California Legislature Passes Early Action Budget Plan


Gov. Gavin Newsom is under fire for recommending a one-day delay for $1.6 billion in payroll costs to push the expense into the next fiscal year.

Facing a $73 billion budget deficit, the California Legislature passed a proposal April 11 to amend prior years’ budgets and reduce the spending gap by about $17.3 billion.

Included in the so-called “junior budget bill” are a combination of $3.6 billion in reductions, $5.2 billion in new revenue and borrowing, $3.1 billion in delays, $2.1 billion in deferrals, and about $3.4 billion in cost shifts from the state’s general fund to other funding sources.

The plan revisits the prior two fiscal years’ budgets and moves billions of dollars in unspent money back to the state’s general fund.

Proponents of the package said that while it helps address the shortfall, more solutions will be necessary before the budget is passed by its June 15 deadline. The 2024–25 fiscal budget goes into effect July 1.

“This early action, of course, does not solve our budget deficit but it is significant progress,” state Sen. Scott Wiener, chair of the Senate Budget Committee, said during an April 10 hearing on the issue. “We can spend the next couple of months focusing on some of the truly difficult decisions we will have to make to pass a balanced budget, which we will do.”

Another lawmaker in support of the plan noted the challenges ahead.

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“There will continue to be tough conversations and oversight,” Assemblywoman Akilah Weber said before voting in favor of the package on the Assembly floor April 11.

Introduced by Democratic lawmakers, Assembly Bill 106 passed on a partisan vote in the Assembly and the Senate Thursday, with Republicans staunchly opposed to what they called “accounting tricks” and a “bag of gimmicks” that includes nearly $14 billion in borrowing, deferrals, delays, and shifts.

“The budget process has completely eroded, and my Democratic colleagues are not taking this budget and this growing deficit as seriously as they should,” state Sen. Roger Niello, vice chair of the Senate Budget Committee, said in an April 11 press release after the package passed. “Borrowing to pay operating costs is foolish, and delays and deferrals in this budget bill are serving up false expectations.”

The lawmaker has repeatedly noted that Republicans were not included in the planning process.

“Republicans have been no part of that discussion,” Mr. Niello said April 10 during the Senate Budget Committee hearing. “The eight million citizens we represent are not represented, which is disappointing.”

A fellow Republican senator took exception to an aspect of the plan that shifts—by one day—$1.6 billion in the June 30, 2025, payroll costs to July 1, 2025, landing them in the subsequent fiscal year’s budget.

“Gimmicks and tricks are trademarks of Legislative Democrats as they pat themselves on the back and claim this early budget action will close a massive budget deficit,” state Sen. Brian Dahle said in a Republican Caucus April 11 press release. “It’s sad, but honestly laughable that Democrats think Californians will believe they’ve balanced the budget with this tactic.”

State Sen. Brian Dahle, R-Bieber speaks at the California Senate Republican Caucus's "Fix California" press conference in Sacramento on March 3, 2023. (Courtesy of Sen. Brian Dahle's Office)
State Sen. Brian Dahle, R-Bieber speaks at the California Senate Republican Caucus’s “Fix California” press conference in Sacramento on March 3, 2023. (Courtesy of Sen. Brian Dahle’s Office)

California Gov. Gavin Newsom called the payroll shift a “gimmick” in a 2019 budget press conference and vowed to eliminate the same process used by former Gov. Arnold Schwarzenegger to help balance the budget during the Great Recession in 2009.

“If I use it in six years, in a recession, forgive me,” he said during the 2019 press conference.

But with a ballooning deficit, Mr. Newsom is now recommending the tactic.

The state’s spending patterns were highlighted by another critic as contributing to the budget dilemma.

“We need structural reforms to rein in spending,” Assemblyman Vince Fong said in opposition to the plan on the Assembly floor Thursday. “Our budget crisis is being driven by overspending which has put California’s finances on an unsustainable path.”

Citing details of the plan—with reductions for ongoing spending accounting for less than 1 percent of actions taken—he argued that more cuts are needed.

“Clearly, more needs to be done to get our fiscal house in order,” Mr. Fong said. “Papering over the massive budget hole and declaring victory does not make the financial problems go away. Instead of acting in the world of fiscal reality, the governor relies on gimmicks to delay the inevitable at the expense of future budgets.”

Acknowledging the need to further tackle the issue in the coming months, the governor said the package will help provide more flexibility as discussions continue.

“I thank our legislative leaders for their partnership in taking this major step to address the shortfall with a balanced approach that meets the needs of Californians and maintains a strong fiscal foundation for the state’s future,” Mr. Newsom said in an April 4 press release when the plan was announced. “There is still work to do as we finalize the budget, and I look forward to the work ahead together to continue building the California of the future.”

The exact amount of the budget deficit is unclear. The state’s non-partisan Legislative Analyst’s Office estimates it at $73 billion, while the governor’s Department of Finance calculates a $38 billion shortfall.

The California state Capitol building in Sacramento, Calif., on Aug. 28, 2023. (John Fredricks/The Epoch Times)
The California state Capitol building in Sacramento, Calif., on Aug. 28, 2023. (John Fredricks/The Epoch Times)

Differences in calculations for solutions proposed by the governor in January account for about $20 billion of the difference, Legislative Analyst Gabriel Petek told The Epoch Times in a previous interview.

Further differences are attributed to adjustments made after revenues failed to meet expectations in December 2023 and to start the new year in January.

However, tax collections exceeded estimates for February and March, according to the Department of Finance.

One Republican critic called the budget process a “facade” concocted in secret behind closed doors.

“Just make no mistake, they know they have a massive budget, and what they’re doing is hiding what they’re actually going to do about it,” Assemblyman Bill Essayli told The Epoch Times. “They’re probably going to try and cram it in at the very end of the budget cycle when there won’t be any time for debate.”


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