Just ahead of his constitutional deadline, this morning Gov. Gavin Newsom will present his initial spending plan for 2024-25 today, kicking off six months of negotiating, demanding and perhaps a little whining for good measure.
That’s particularly the case when the governor and state legislators must figure out how to cover a huge budget deficit. Some key questions to keep in mind:
How big a deficit does Newsom project? The nonpartisan Legislative Analyst’s office says the current estimate is about $68 billion, but the governor has hinted his Department of Finance will offer a lower number, which would mean a smaller problem to solve.
How much does Newsom dip into reserves? The state has some $24 billion in savings, so using it could avoid some controversial spending cuts. But California still needs to save for a rainy day in case the economy worsens.
Where are the spending cuts? The governor ordered a spending freeze last month and is expected to look first to cut one-time expenditures and programs that haven’t started yet. He’s already said he wants to take another look at phased-in wage increases for healthcare workers, so don’t be surprised if he proposes a delay.
Are any significant programs cut? For example, Republicans are targeting a new expansion of Medi-Cal coverage for low-income undocumented immigrants. But Newsom said last week that he’s “committed” to the first-in-the-nation plan.
Which interest groups get hit hardest? It’s campaign season, so how willing is Newsom to take money away from labor unions and other loyal supporters of Democrats?
Where are the potential conflicts with legislators? When the Legislature reconvened last week, Democratic leaders said they want to protect existing services and aid to Californians as much as possible. But will there be enough savings elsewhere to avoid painful cuts to the safety net, education, environmental protection and a host of other priorities?
Are taxes on the table? California’s boom-and-bust budget cycle is largely because of a progressive income tax system that relies heavily on the stock market windfalls of wealthy Californians. But attempts to change the tax system haven’t gone very far. Also unlikely during an election year — a full-on tax increase.
That isn’t stopping Assemblymember Alex Lee, a Mipitas Democrat, from trying again on his 1% wealth tax on billionaires and multimillionaires, which he says would generate $20 billion a year. But a Newsom spokesperson quickly shot down the idea, saying Tuesday that “wealth tax proposals are going nowhere in California.”
The governor’s budget reveal is scheduled for 10:30 a.m. and will be livestreamed. A reminder on the timetable ahead:
- Mid-January: The Legislative Analyst’s Office will release its initial review of Newsom’s plan.
- Late January: Legislative budget committees will start hearings.
- May 14: Newsom’s deadline to present a revised budget, based on updated revenue estimates.
- June 15: The Legislature’s deadline to pass a balanced budget (lest they don’t get paid).
- July 1: The deadline for Newsom and the Legislature to approve a final 2024-25 spending plan.
