California Gov. Gavin Newsom signs budget to close $46.8B budget deficit
FILE - California Gov. Gavin Newsom speaks to reporters after a presidential debate between President Joe Biden and Republican presidential candidate former President Donald Trump in Atlanta, Thursday, June 27, 2024. On Saturday, June 29, 2024, Newsom signed California's budget to close an estimated $46.8 billion deficit through $16 billion in spending cuts and temporarily raising taxes on some businesses. (AP Photo/John Bazemore, File)
Gov. Gavin Newsom has signed California’s budget to close an estimated $46.8 billion deficit through $16 billion in spending cuts and temporarily raising taxes on some businesses
“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 stewardship of the budget over the past few years, we’re able to meet this moment while protecting our progress on housing, homelessness, education, health care and other priorities that matter deeply to Californians.”
The deficit was about $32 billion in 2023 before growing even bigger this year, with more deficits projected for the future in the nation’s most populous state. Saturday's signing came just two years after Newsom and Democratic lawmakers were boasting about surpluses that totaled more than $100 billion, the product of hundreds of billions of dollars of federal COVID-19 aid and a progressive tax code that produced a windfall of revenue from the state’s wealthiest residents.
But those revenue spikes did not 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 reliance on its wealthiest taxpayers. But these deficits have come at a bad time for Newsom, who has been building his national profile ahead of a potential future run for president and has been tapped as a top surrogate for President Joe Biden’s campaign.
The budget includes an agreement that Newsom and lawmakers will try to change the state constitution to let California put more money in reserve for future shortfalls.
Republicans, however, said they were left out of negotiations. They criticized the tax increase on businesses, which applies to companies with at least $1 million in revenue and will last for three years, bringing in more than $5 billion extra for the state next year. And they criticized Democrats for some cuts to social safety net programs.
