SACRAMENTO — Gov. Gavin Newsom signed California’s budget Saturday that aims to close an estimated $46.8 billion deficit through $16 billion in spending cuts and temporarily raising taxes on some businesses.
Lawmakers approved the budget Wednesday after Newsom and legislative leaders reached an agreement. Both parties made concessions and also recorded victories, as they were forced to scale back or postpone some progressive policies for the second year in a row. These were fueled by record surpluses during the COVID-19 pandemic.
“This is a responsible budget that prepares for the future while investing in foundational programs that benefit millions of Californians every day,” Newsom said in a statement. “Thanks to careful budget management in recent years, we can meet this moment while protecting our progress on housing, homelessness, education, health care and other priorities that matter deeply to Californians.”
The deficit stood at about $32 billion in 2023 before widening further this year, with even larger shortfalls expected in the nation’s most populous state. Saturday’s signing came just two years after Newsom and Democratic lawmakers boasted surpluses totaling more than $100 billion, the product of hundreds of billions of dollars in federal COVID-19 aid and a progressive tax law that provided a windfall of revenue to the state’s wealthiest residents.
But those revenue spikes didn’t last as inflation slowed the economy, contributing to rising unemployment and a slowdown in the tech industry that has driven much of the state’s growth. The Newsom administration then badly miscalculated how much money California would have last year after a seven-month delay in the tax filing deadline.
California has historically been prone to large budget swings, given its dependence on the wealthiest taxpayers. But these deficits came at a bad time for Newsom, who was building his national profile ahead of a possible future race for president and has been tipped as a top surrogate for President Joe Biden’s campaign.
The budget includes an agreement that Newsom and lawmakers will seek to amend the state constitution to allow California to keep more money in reserve for future deficits.
Republicans, however, said they were left out of the negotiations. They criticized the business tax increase, which applies to companies with at least $1 million in revenue and will last for three years, bringing in more than $5 billion in additional revenue for the state next year. And they criticized Democrats for some cuts to social safety net programs.
