SACRAMENTO, Calif. — To close California’s budget gap of about $46.8 billion, Gov. Gavin Newsom signed it on Saturday. The budget cuts spending by $16 billion and temporarily raises taxes on some businesses.
Wednesday, lawmakers passed the budget after Newsom and legislative leaders agreed. Both sides gave up some things and got some things in return. For the second year in a row, they had to cut back on or delay some progressive policies that had been made possible by record-breaking budget surpluses during the COVID-19 pandemic.
Newsom said in a statement, “This is a responsible budget that plans for the future while investing in core programs that help millions of Californians every day.” “Because we’ve been good with the budget over the past few years, we can handle this while keeping the progress we’ve made on housing, homelessness, education, health care, and other issues that are very important to Californians.”
The deficit was about $32 billion in 2023 and is expected to get even bigger this year. This is the first deficit in the history of the country’s most populous state. Two years before Saturday’s signing, Newsom and other Democratic lawmakers were bragging about surpluses of more than $100 billion. These were made possible by hundreds of billions of dollars in federal COVID-19 aid and a progressive tax code that brought in extra money from the state’s wealthiest residents.
But those big jumps in income didn’t last because inflation slowed down the economy. This made unemployment rise and the tech industry, which has been a big part of the state’s growth, slow down. After the tax date was pushed back by seven months, the Newsom administration made a big mistake in figuring out how much money California would have last year.
Because California depends so much on its richest taxpayers, its budget has gone through big changes in the past. But Newsom has been building his national image ahead of a possible run for president in the future, and these deficits have come at a bad time for him. He has been chosen as a top surrogate for President Joe Biden’s campaign.
As part of the budget, Newsom and lawmakers agreed to try to change the state constitution so that California can save more money in case of future budget gaps.
But Republicans said they were left out of the talks. They didn’t like the tax increase on businesses, which affects companies that make at least $1 million a year and will last for three years. It will bring in more than $5 billion extra for the state next year. They also said that Democrats were wrong for cutting some services that help people in need.
Source: AP