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As Revenues Plummet, California Budget Cuts Billions



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SACRAMENTO — Reflecting the financial hit California is already seeing from the coronavirus pandemic, Gov. Gavin Newsom on Thursday proposed cutting $6.1 billion from a variety of programs in a state budget he says prioritizes public education, public health and public safety.

Newsom’s 2020-2021 budget estimates unemployment will climb to nearly 25 percent and overall tax revenues will drop by about a quarter, he said. It also calls for a 10% pay cut for all state workers.

“Nothing breaks my heart more than having to make budget cuts,” he said. “There’s a human being behind every single number.”

California’s financial downturn is cushioned by a $16 billion rainy day fund set aside during the good times. Newsom’s budget, which will now be negotiated with the state Legislature, calls for spending the rainy day fund down over the next three years, starting with roughly $8 billion in the upcoming year. He’s also tapping two other reserve funds for another $1 billion.

The $203 billion budget revision he proposed Thursday represents about 5% lower spending than the current year, despite a budget hole his administration pegged at $54.3 billion. That’s because many of the cuts come from planned expansions of safety net programs and social services he and other Democrats sought in the upcoming budget.

The 10% pay cut for state employees would save about $2.8 billion overall, budget documents said, though the reductions would not occur “if the federal government provides sufficient funding to restore them.” The state will seek the savings through collective bargaining with the unions that represent different workers, but the administration will “impose reductions if the state cannot reach an agreement.”

Spending on K-12 Education Will Fall by Nearly $7 Billion

Newsom said the pay cuts will also apply to him and his staff.

“We will find efficiency. You deserve a leaner government that’s more nimble, more effective and targets the needs of the most vulnerable,” Newsom said.

The budget decreases spending on K-12 education by nearly $7 billion compared to the 2019-2020 budget year. Newsom said billions more in cuts to schools can be staved off by tapping federal coronavirus funding and reducing some tax perks. He also calls for cuts to Medicaid payments by at least $280 million.

His ambitious plans to help local governments tackle homelessness also appeared to take a hit. Under the revised budget, he’ll rely more on federal than state money to help the homeless.

On Wednesday, Newsom said his revised budget would include more than $200 million to increase the state’s preparations for looming wildfires and other disasters, including hiring another 500 firefighters and 100 support personnel to help make up for the loss of dozens of inmate firefighters who were paroled to ease the risk of coronavirus outbreaks.

State officials have furloughed state workers during previous budget deficits and used tricks like paying state employees a day later to save money during the last major recession.

Newsom had proposed a $222.2 billion spending plan in January that included a nearly $6 billion surplus. But that changed in March, when he issued a mandatory, statewide stay-at-home order to slow the spread of the coronavirus.