The deal, announced last August, committed California and Google to each put tens of millions of dollars into a fund to be distributed to local news outlets over five years. In exchange, lawmakers scrapped two ambitious proposals that sought to force the search engine behemoth and its tech counterparts to pay outlets for using their published content.

But Gov. Gavin Newsom on Wednesday proposed to slash the state’s initial commitment to the journalism fund by two-thirds. 

Department of Finance spokesperson H.D. Palmer wrote in an email that the administration is seeking to reduce the state’s first-year payment of $30 million to $10 million solely because of “fewer resources than projected in the January budget.” The cut is part of Newsom’s May budget proposal, in which he’s seeking to close an estimated $12 billion shortfall for the 2025-2026 fiscal year that begins in July. 

The proposal to reduce the state’s share of the funding outraged local news advocates and proponents of requiring tech platforms to pay journalism outlets for their content — who already called last year’s deal insufficient. It raises questions about Google’s commitment to paying its share of the matching funds, and the overall status of the agreement which was announced in August but appears to have made little progress toward becoming reality. 

There were no signed term sheets in Google’s handshake deal with the state and with lawmakers last year — only public promises. 

“It’s extremely disappointing,” said Steven Waldman, president of the journalism advocacy group Rebuild Local News. “It was already too small and they’ve walked in the wrong direction from it at a time when the collapse of community news in California continues … Pink slime and rumor and misinformation is flooding into the vacuum so time is of the essence to try to turn this around. Instead, the effort is shrinking.”

A draft of the deal released last year suggested UC Berkeley would administer the funding program; the university has since declined to do so and the state has not announced a new administrator. As a result, Google also does not appear to have made its first-year payment of $15 million toward the fund, Waldman said.

The deal did not include strict timelines, but proponents said they aimed to “front-load” much of the money in the first year, which they believed could garner more private contributions along the way.

Deal struck after millions in lobbying from Google

Neither Newsom’s office nor Google responded to inquiries. The Computer and Communications Industry Association, a lobbying group that last year was largely bankrolled by Google to oppose the news bills, declined to comment. Google’s payments to influence state lawmakers surged to almost $11 million from July through September last year when the bills were under consideration – 90 times more than it has ever spent on lobbying in California over the same period of time.

A spokesperson for Assemblymember Buffy Wicks, who negotiated the deal last year in exchange for abandoning her bill that would have required platforms such as Google and Meta to either pay a fee or negotiate with news outlets for using their news content, said there would be “more information to share on this in the coming days.”

Wicks, in a statement, did not address the proposal to cut state funding. Instead the Oakland Democrat thanked Newsom for “for making an essential public investment that strengthens journalism” and described the funding as a “down payment, combined with those of private and philanthropic partners.”

After the first-year payments, Google and the state both were to put $10 million a year into the fund for four more years. 

The company also agreed to continue paying $10 million a year in existing grants to newsrooms — money it had threatened to withhold if the legislation passed. And it planned to put $17.5 million into an unspecified artificial intelligence program that had given some journalists and their union representatives anxiety over job losses. 

Now, Waldman is worried the state’s reduction in funding could prompt the company to do the same. As part of the deal, Google specified it would only pay into the journalism fund as a match to state dollars, said former Sen. Steve Glazer, the author of the other bill that was scrapped.

“They did not want a precedent to be set in California that could be easily replicated in other states, so they insisted upon a state match,” he said. “The fact that the governor is proposing to renege on (part of the deal) is a cherry on top for Google and it allows them to reduce their contribution if they desire.”

Glazer’s bill would have imposed a fee on major tech platforms to provide news outlets a tax credit to employ local journalists. The measure, legislative staff estimated, would have raised $500 million a year. Wick’s bill requiring the platforms to negotiate payments to news outlets was modeled on similar programs in Canada and Australia, but the political headwinds were tough in the tech companies’ home state. 

Lawmakers pursued both proposals to try to stem the decline of the news industry in California.  

Following a nationwide trend, media companies have hemorrhaged jobs over the past two decades as advertisers fled print media for the internet and technological advancements reshaped how readers consume news. The state has lost one-third of its newspapers since 2005 in a trend experts say worsens civic engagement, polarization and misinformation.

To try to keep their readers, publications increasingly rely on social media and online search. Google controls the lion’s share of search in a way the U.S. Justice Department and one federal judge have said violates antitrust law. 

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A new program created by California’s consumer protection agency aims to provide free, personalized help for Golden State borrowers struggling to navigate the complex, byzantine student loan system.

The Student Loan Empowerment Network is designed to provide financial coaching and assistance for borrowers, including help securing income-based repayment plans and federal student loan forgiveness for those working in public service jobs.

“The student loan system is fraught with systemic issues that make it practically difficult, if not impossible, for people to get the rights and benefits they’re supposed to be entitled to under the law,” said Suzanne Martindale, the senior deputy commissioner for consumer financial protection at the California Department of Financial Protection and Innovation.

Martindale said in many cases, borrowers might be eligible for some form of loan relief, but don’t know how to access it because “the information hasn’t been clear, because the goalposts keep changing, because the loan servicers can’t seem to give you an accurate answer.”

“People need somewhere to go to get accurate, fair information, working with someone who cares about their best financial interests,” Martindale said.

Borrowers who want help from the program can fill out an intake form at studentloanhelp.dfpi.ca.gov or call (888) 774-2227.

Borrowers will be connected with a financial counseling agency or legal aid agency. In Los Angeles, those include Public Counsel, the Legal Aid Foundation of Los Angeles and the Koreatown Youth & Community Center.

The program will offer a mix of webinars and financial coaching sessions. Some borrowers with “very complex legal issues” may require one-on-one help, including those who have older private loans from defunct issuers, or have been in default on their loans, Martindale said.

Gov. Gavin Newsom’s 2022-2023 budget set aside $7.25 million for the student loan assistance and education program and $2.25 million for a statewide marketing campaign.

The organizations working on the loan program will be required to track the number of people who switch to income-based payment plans, document their employment for public service loan forgiveness and have their loans discharged, Martindale said.

Helping Californians reduce their loan burdens using publicly available programs can have a major economic benefit for the state, she said. She said she hopes the program becomes a permanent fixture in the state, although the looming shortfall makes that less certain.

After the pandemic-era freeze on student debt expired last year, about 40% of borrowers with federal student loans missed their first monthly payment last fall, according to federal data.

Borrowers who are delinquent on their federal loans won’t be reported to credit bureaus until Sept. 30 of this year, but in the meantime, interest continues to accrue.

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Last month the Democrat unveiled his budget for the next fiscal year, admitting that ‘difficult decisions’ are needed to address the state’s deficit – including a 1.6 percent reduction in the state’s Department of Justice’s overall funding.

The proposed budget includes a $97 million cut to trial court operations, $10 million to the Department of Justice’s Division of Law Enforcement and over $80 million to the Department of Corrections and Rehabilitation, as reported by Fox News.

Newsom’s plan comes as major national stores and local businesses in California say they continue to face rampant theft. Videos of large-scale thefts, in which groups of individuals brazenly rush into stores and take goods in plain sight, have often gone viral.

Crime data shows the San Francisco Bay Area and Los Angeles saw a steady increase in shoplifting between 2021 and 2022. Across the state, shoplifting rates rose during the same time period but were still lower than the pre-pandemic levels in 2019, while commercial burglaries and robberies have become more prevalent in urban counties.

Meanwhile homelessness jumped 6 percent to more than 180,000 people in California last year, federal data show. And since 2013, the numbers have exploded by 53 percent with the state accounting for a third of America’s entire homeless population.

The state’s criminal justice record which saw the number of violent crimes jump by 27 percent between 2013 and 2022, and pickpocketing more than double.

This is the second year in a row the nation’s most populous state is facing a multibillion-dollar shortfall. State revenues have continued to fall amid increasing inflation and a slowdown in the state’s usually robust technology industry.

Officially, Newsom said the state’s deficit is $27.6 billion. But really, it’s closer to $45 billion when including previous spending reductions that Newsom and the state Legislature agreed to in March.

Including reductions in public education spending, which Newsom has not included, the deficit would be even billions of dollars more, according to recent analysis by the nonpartisan Legislative Analyst’s Office.

A spokesperson for Newsom told Fox News in a statement: ‘The budget proposes numerous ways to make government more efficient and reduce costs for taxpayers, including cuts on inmate spending.

‘Since Governor Newsom took office in 2019, the state has made record investments in law enforcement, including $1.1 billion to tackle crime, support police, and hold criminals accountable.’

So far, Newsom has not gutted some of his splashiest policy advancements, including free kindergarten for all 4-year-olds and free health insurance for all low-income adults regardless of their immigration status.

But as Friday’s proposal showed, Newsom is willing to chip away at some of those promises to balance the budget.

While Newsom has not taken away health insurance from anyone, he proposed the state stop paying for health care workers to care for some 14,000 disabled immigrants in their home. That would save the state $94.7 million. While he hasn’t pulled back the state’s commitment to expanded kindergarten, he proposed eliminating $550 million that would have helped school districts build the facilities they need to teach all of those extra students.

After promising to pay for child care for another 146,000 children from low-income families, Newsom on Friday proposed pausing that expansion at 119,000. And after promising to boost how much money doctor’s get to treat Medicaid patients, Newsom on Friday proposed canceling $6.7 billion that had been set aside to do that.

In total, Newsom is proposing $32.8 billion in cuts over two years, including eliminating 10,000 unfilled state jobs and an 8 percent cut to state operations — including things like eliminating landlines. He promised there would be no layoffs, furloughs or salary cuts for the state’s more than 221,000 state workers.

The size of the deficit is important as it will shape the national perspectives of Newsom, who is a top surrogate for President Joe Biden’s reelection campaign and who is widely believed to harbor presidential aspirations of his own.

Newsom has spent much of his time in office basking in the glow of historic budget surpluses that allowed him to greatly expand state spending. But back-to-back budget deficits — with more on the horizon — are testing California’s commitment to those increases.

Newsom had enjoyed unprecedented surplus budgets of more than $100 billion throughout the COVID-19 pandemic. But the past two years have saddled him with a pair of multibillion-dollar deficits, a less-welcome position for a governor seen as a potential future Democratic presidential candidate.

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Unfortunately, the proposal still relies on too many budget gimmicksand fund shifts. The Newsom plan also underestimates the severity of the current budget shortfall that must be addressed. Making matters worse, growing economic headwinds, including the tech industry laying off over 81,000 people and California’s subpar personal income growth, raises concerns that the deficit will continue to widenthroughout the year.

The focus on budget responsibility obscures some troubling trends. For example, while focusing on administrative efficiencies, the Governor fails to demand efficiencies in the programs that can yield substantial long-term budgetary savings.

Consider the Administration’s own admission at an Assembly Budget Committee hearing this week that they have no idea whether billions in Project Homekey homelessness expenditures have worked. Taxpayers deserve better with California facing a massive shortfall.

The May Revise also focuses too much on one-time budgetary savings, budget gimmicks, and fund shifts in the hope of restoringspending once revenues have returned to “normal.” But what Gov. Newsom calls normal are the unsustainable revenue surges that are inevitably followed by revenue crashes.

Spending these revenue surges has caused the growth in state expenditures to outpace growth in residents’ incomes. A budget that temporarily reduces spending and plays budgetary games only to continue the Governor’s profligate spending ways sets the state budget up for a future budget crisis.

This approach also wastes the important breathing room that the rainy-day fund reserve is supposed to provide – blowing through half the fund’s balance this year and next while failing to put the state on a sustainable budget path.

Basic budget arithmetic demonstrates that there are three options going forward – greater spending restraint, increased borrowing, or higher taxes.

There are many other ways to reduce spending including making more proposed one-time spending cuts permanent and further reducing Proposition 98 education spending. These reductions are by no means easy or costless, although the sheer amount of ineffective spending by the state (such as Project Homekey spending) demonstrates the many opportunities for the state to do better with less.

More budgetary borrowing, which took the state years to pay off when widely used in the 2000’s, is simply another way of kicking the problem down the road.  Nor is now the time to embrace billions in new borrowing for housing, the environment, schools, or other priorities we cannot afford.

This leaves the tax increase option. While he rejects tax increases this year, not making sufficient additional cuts this year makes future tax increases more likely.

Remember the 2009 budget crisis.  Politicians of both parties embraced budgets during the 2007-09 economic meltdown thatavoided tough spending choices and set the state up for a devastating 2009 budget that included billions in painful cuts to important programs and billions in tax increases.  

Like today, problems were evident well before the 2008-09 budget crisis. The failure to take sufficient actions caused credit rating agencies to downgrade California’s rating five times. Lower credit ratings increased borrowing costs, making addressing the problem more expensive.

Only after the crisis was undeniable, did politicians finally implement actual painful budget solutions that included nearly $60 billion in budget actions. These efforts required actual declines in year over year spending in excess of 15 percent relative to 2007.

The 2009 budget crisis should have taught our political leaders that spending gimmicks and blind hope turns today’s troubles into a worsecrisis tomorrow.

Now action on the Newsom budget turns to the Legislature.  One major question looms – will liberal lawmakers who never met a spending increase they didn’t like embrace cuts – even temporary ones – to CalWORKs, childcare and environmental programs?  Not likely.

Californians are now watching to see if Gov. Newsom and legislative leaders have learned their lesson and will pass a final state budget that reins in the state’s excessive spending sooner rather than later.

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