California lawmakers and Gov. Newsom reach budget deal with widespread department cuts

Governor Gavin Newsom and legislative leaders have successfully reached a budget agreement totaling nearly $300 million on Saturday, effectively addressing a projected $46.8 deficit for the upcoming fiscal year. This comprehensive budget plan includes significant across-the-board cuts of approximately 8% to every department within the state.

The proposed $297.5 billion budget is designated for both the 2024-25 and 2025-26 fiscal years, a strategic move coined by the governor as a “budget year, plus one” approach. This innovative strategy aims to align spending with revenue projections for the next two years, fostering long-term fiscal stability for the state.

Governor Newsom expressed his satisfaction with the agreement, emphasizing its role in ensuring the state’s financial resilience in the face of current challenges. He highlighted the preservation of essential programs benefiting millions of Californians, including critical funding for education, healthcare, expanded behavioral health services, and efforts to combat homelessness.

To close the budget gap, a combination of measures was employed, including $16 billion in cuts and various financial tactics such as securing $13.6 billion from additional revenue sources and internal borrowing from special funds. The plan also involves reallocating $6 billion in spending, postponing or deferring over $5 billion in payments, and tapping into the state’s Budget Stabilization Account, commonly known as the rainy-day fund, for over $12 billion over the next two fiscal years.

Among the notable cuts are $1.1 billion from affordable housing programs and $500 million from the California Student Housing Revolving Loan Program. Additionally, departments will experience a 7.95% budget cut, resulting in approximately $2.2 billion in savings. Furthermore, $1.5 billion was trimmed from department budgets to account for unfilled positions.

Senate President Pro Tempore Mike McGuire acknowledged the challenging budget year but noted that the actual cuts were less severe than initially anticipated in May. He emphasized the significance of the balanced budget in addressing critical issues such as homelessness, housing affordability, wildfire prevention, and combating retail theft.

Assembly Speaker Robert Rivas echoed similar sentiments, emphasizing the budget’s focus on affordability and long-term stability. The budget prioritizes investments in lowering housing costs, supporting vulnerable families, and sustaining essential programs crucial for the state’s well-being.

The agreement includes new revenue sources, such as limiting the business tax credit to $5 million in each of the next three tax years, projected to generate approximately $15 billion over the same period. The final budget bill awaits approval from the full legislature before being signed into law by the governor.

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