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California Budget Raises Business Taxes, Closes $54 Billion Deficit
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By Associated Press
Published 4 years ago on
June 26, 2020

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SACRAMENTO — The California Legislature on Friday finished work on a state spending plan that closes a historic $54.3 billion deficit by temporarily raising business taxes, cutting funding to courts, colleges and state worker salaries, and delaying billions of dollars in payments to public schools.

Lawmakers avoided painful cuts to public schools and health care programs in part by temporarily raising taxes on businesses with more than $1 million in annual revenue, borrowing from funds restricted for things like cleaning up oil spills and helping AIDS patients buy medication, and delaying billions of dollars in expenses to future years.
The $202.1 billion budget marks an incredible reversal for the state’s most populous state, which just six months ago was preparing a spending plan that included a multibillion-dollar surplus. But that changed in March, when Gov. Gavin Newsom issued a stay-at-home order that forced many businesses to close and caused more than 6.7 million Californians to file for unemployment benefits.

Budget Borrows From Restricted Funds, Reserves

Lawmakers avoided painful cuts to public schools and health care programs in part by temporarily raising taxes on businesses with more than $1 million in annual revenue, borrowing from funds restricted for things like cleaning up oil spills and helping AIDS patients buy medication, and delaying billions of dollars in expenses to future years.
“We could have made more cuts. We could have had a budget that was better for our bond rating. But we decided that it was more important to ensure that schools remain held harmless, more important to make sure we didn’t cut health care,” said Assemblyman Phil Ting, a Democrat from San Francisco and chair of the Assembly Budget Committee.

Budget Relies on Gimmicks: Republicans

Republicans warned the budget was filled with gimmicks that disguise the state’s true finances by simply putting off tough decisions.
“This budget only delays the inevitable,” said Assemblyman Vince Fong, a Republican from Bakersfield. “We will have to come back again and plug another budget deficit because we didn’t do what we were supposed to do.”
The Assembly voted 57-16 on a party-line vote Friday to approve the main budget bill. But much of the debate at a legislative hearing on Friday morning focused on a series of policy proposals tucked within the complex package of 19 budget bills that would reduce the length of parole, ban colleges from asking about criminal histories in admissions and let judges overrule prosecutors to give diversion programs to people charged with misdemeanors — including sex crimes.
“The reason we have a legislative process is so we can have those debates in a public forum, and we’re not doing that here,” said Republican Assemblyman Jay Obernolte, vice-chair of the Assembly Budget Committee. “We’re rushing through this.”

Debating Public Safety Issues

Most of lawmakers’ concerns were about a budget bill focused on public safety issues. Democratic Assemblyman Jim Cooper, a former police officer, said he was worried about giving judges the authority to put people in diversion programs for misdemeanors without restricting some offenses, including sex crimes and possession of child pornography.
Aaron Edwards, a representative from Newsom’s Department of Finance, said he thought in those instances judges would choose not to offer a diversion program — which once completed clears the offense from the person’s record.
“Judges make mistakes,” Cooper said during a legislative hearing. “That’s not good law, and that’s not good practice.”
But California’s prison system is “blowing up and eating up all of our budget” in part because judges don’t have the discretion to offer people alternatives to incarceration, Democratic Assemblywoman Shirley Weber said.
“Our prison system is a crapshoot, whether or not they really rehabilitate folks,” she said. “We have been trying to back out of that absolute stuff and get to a point where judges and lawyers and others have some discretion.”

Newsom: ‘A Responsible Budget’

Newsom on Friday called the bills “a responsible budget under the historically difficult circumstances we face.” Just six months ago, California was preparing how to spend a multibillion-dollar surplus. That changed in March, when Newsom issued a stay-at-home order that forced many businesses to close and has caused more than 6.7 million Californians to file for unemployment benefits.
The budget avoids permanent cuts to public schools and health care programs. But it cuts $150 million from the court system, $2.8 billion from state employee salaries, $1.7 billion from public colleges and universities and $248 million from housing programs. All of that money would be restored if the federal government sends the state additional aid by Oct. 15.

Help for Immigrants Regardless of Status

Lawmakers did find money for new spending, including two programs aimed at helping people living in the country illegally.
For the first time, California will allow some low-income immigrants who don’t have a Social Security number to be eligible for a credit that increases the size of their state tax refunds. But it only applies to people who have a child 5 and younger, excluding hundreds of thousands of working immigrants.
And California will set aside $10 million in loans to small businesses run by immigrants, regardless of their immigration status. Republicans have objected, arguing the state shouldn’t be cutting funding to colleges and universities while giving loans to people living in the country illegally. But the Newsom administration defended the spending, calling it a “comparatively small amount of funding” to people who are not eligible for federal assistance

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