The budget lawmakers approved is not the state’s final spending plan. Newsom and legislative leaders are still negotiating how to fix the shortfall before the start of the new fiscal year on July 1. But lawmakers had to pass a balanced budget by Saturday or else they would forfeit their six-figure salaries — a rule voters approved in 2010 to prevent the types of budget stalemates that had delayed negotiations in the past.

That is why Thursday’s vote was not really a public rebuke of Newsom, a Democrat who for the most part has had a good relationship with a Legislature dominated by members of his own party. Instead, the vote highlights the differences between Newsom, a second-term governor who many believe holds presidential aspirations, and a liberal state Legislature that is often more willing to take risks.

While Newsom’s budget proposal preserved most of the state’s major assistance programs, he included a number of smaller cuts that angered his Democratic allies. He proposed to stop paying for in-home caretakers for some disabled immigrants on Medicaid. He wants to eliminate a program that helps provide housing for families with incomes less than $13,000 per year. And he suggested delaying a rate increase for organizations that care for people with intellectual disabilities.

To reject these cuts, lawmakers needed to find more money. They found it by taking one of Newsom’s ideas and making it happen faster.

Newsom proposed temporarily stopping some businesses from deducting financial losses from their state taxable income, thus increasing their tax bill. It has become a common way to increase revenue during budget shortfalls. The Legislature chose to do this, too, but their plan would start the tax increase one year earlier. That generated an extra $5 billion in revenue compared with Newsom’s plan.

Lawmakers also found large budget cuts in other places. They want to cut $1 billion out of the state’s prison budget, arguing the money isn’t needed now that the prison population is about half of what it was two decades ago. And they want to cancel a $400 million loan to PG&E that would help extend the life of the Diablo Canyon nuclear power plant.

Those are just some of the disagreements that the Newsom administration and lawmakers must resolve by the end of the month. On Thursday, both sides indicated they have made good progress. Senate President Pro Tempore Mike McGuire said lawmakers could be voting on a final budget deal by the end of next week.

“I firmly believe the final budget that we’re going to have in front of us here next week will follow the same framework that’s in front of this body here today,” he said.

One major issue that has yet to be addressed by either side is what to do about a minimum wage increase for health care workers that is scheduled to start on July 1. Newsom signed a law last year that would eventually raise health care workers’ minimum wage to $25 per hour over the next decade.

The wage increase is expected to cost the state hundreds of millions of dollars in increased wages for some state workers and increased payments in the state’s Medicaid program, according to an analysis by the University of California-Berkeley Labor Center. Newsom has said he wants to delay the minimum wage increase, but he so far has been unable to get an agreement from the state Legislature.

Republicans, who don’t have enough numbers to sway policy decisions and say they were left out of the budget negotiations with Democrats, criticized the Legislature’s spending plan as unsustainable.

Republican Assemblymember Heath Flora said raising taxes on businesses to help close the deficit would be “an economy killer,” adding “our citizens are not here to provide overdraft protections.”

“We can’t continue to make up the lie that tax increases are a solution to bad management,” he said.

Democratic state Sen. Scott Wiener defended the tax proposal, noting it was just seven years ago that Congress slashed the federal corporate tax rate by 40%.

“All we are asking here during a difficult budget year is to be part of the solution,” Wiener said. “This is a very reasonable approach.”

The post California Legislature rejects many of Gov. Gavin Newsom’s budget cuts as negotiations continue appeared first on The Hemet & San Jacinto Chronicle.

The governor’s proposed budget would cut one-time spending by $19.1 billion and ongoing spending by $13.7 billion through fiscal year 2025-2026, according to the fact sheet. It would enact a nearly 8% cut to state operations, eliminating 10,000 unfilled positions.

The sheet said the governor plans to balance the budget by “getting state spending under control — cutting costs, not proposing new taxes.” He also wants to do this by “reducing reliance on the state’s ‘Rainy Day’ reserves this year.”

The true deficit number may actually be closer to $45 billion, as the administration subtracted a $17.3 billion package of budget fixes Newsom, Assembly Speaker Robert Rivas, D-Hollister, and Senate President Pro Tem Mike McGuire, D-Healdsburg, agreed to in April.

The administration acknowledged it had cut the $17.3 billion from the overall shortfall number in a fact sheet released just before the governor’s press conference Friday.

It was immediately unclear how exactly the administration calculated the deficit, aside from subtracting the legislative agreement.

Newsom pegged the spending gap at $38 billion in January, although the independent Legislative Analyst’s Office later suggested it could be as high as $73 billion.

California’s fiscal year-over-year revenues were $5.8 billion or 4% below Department of Finance forecasts as of March, indicating the overall deficit likely grew.

Budget-watchers had predicted Newsom’s strategy in advance, suggesting he may present a rosier shortfall number by incorporating a handful of previously planned fixes.

The governor’s revised budget announcement kicks off a month of negotiations involving his administration, Assembly Speaker Robert Rivas, D-Hollister, and Senate President Pro Tem Mike McGuire, D-Healdsburg.

The Legislature must pass a budget by June 15 for lawmakers to continue getting paid. The new fiscal year begins on July 1, meaning Newsom has to sign budget legislation by the end of the month.

Just two years ago, the governor was celebrating a budget with a large surplus. This allowed him to invest in a series of bigger policy initiatives, including transitional kindergarten, or pre-kindergarten, Medi-Cal coverage for undocumented immigrants and CARE Court to compel treatment for the seriously mentally ill.

The state in January enacted the final piece of its expansion of Medi-Cal — California’s version of the federal Medicaid program — allowing all those who income-quality to enroll, regardless of immigration status.

But the post-COVID-19 pandemic economy hit California hard. That’s because the state is heavily dependent on its highest-income earners due to its graduated tax structure, the tourist industry was hit hard and supply chains were disrupted.

Federal efforts toeaseinflation by raising interest rates have cooled industries sensitive to rate hikes. This has affected some activities, such as home buying and startup and tech investing.

Also hamstringing the state’s efforts to gauge the government’s economic condition, those involved in crafting the state’s 2023-2024 budget were unable to get the most accurate picture of the state’s finances until November, long after lawmakers and the governor had agreed to a spending plan.

The delay was caused by a large number of Californians who could delay filing their 2023 taxes until November due to deferrals the IRS granted to those affected by winter storms. The situation helped complicate the state’s financial outlook heading into 2024.

Newsom in 2023 and in January committed to some cuts while preserving his major initiatives and social safety net programs.

The post Gavin Newsom releases $288 billion revised budget for California. How he tackled the big deficit appeared first on The Hemet & San Jacinto Chronicle.