California governor OKs budget closing $54.3 billion deficit

SACRAMENTO, California (AP) – California Governor Gavin Newsom signed a budget on Monday that closes an estimated deficit of $ 54.3 billion, temporarily raising corporate taxes, delaying payments to public schools and cutting billions of dollars in spending on state services and workers' wages.

The $ 202.1 billion budget saves mainly public schools and health care programs from spending cuts, removing much of the state's primary savings account and deferring billions of dollars in spending for years to come. But it generates $ 11.1 billion in spending cuts, including $ 2.8 billion in state workers' salaries, $ 1.7 billion from public colleges and universities, and $ 248 million from housing programs.


“In the face of a global pandemic that has also caused a recession worldwide and here in California, our state has approved a balanced, responsible budget that protects public safety, health, education and services for Californians who face the greatest difficulties. Newsom said.

State officials had anticipated another billion-dollar surplus this year as the state was in its tenth year of economic growth that led to record low unemployment. But that changed in March, when Newsom issued an order to stay at home across the state to slow the spread of the coronavirus, forcing many companies to close and more than 6.7 million Californians to apply for unemployment benefits.

The state has spent billions of dollars in response to the virus, including buying hundreds of millions of protective equipment for healthcare professionals, securing hotels and motels to house the homeless and renting hospitals to prepare for a possible outbreak of patients. Meanwhile, with so many people unemployed, millions of people have signed up for state services – increasing state costs.


These factors, combined with the drop in revenues, led the State to move from a projected surplus of US $ 6 billion in January to an estimated deficit of US $ 54.3 billion.

In response, Democrat Newsom proposed billions of dollars in cuts for public schools and health care programs. But the Democratic-controlled state legislature rejected those cuts, convincing Newsom to sign a plan that balances the budget by relying more on reserves, borrowing other state funds and delaying spending – all tactics used by the state during the Great Recession, a decade ago.


"Taking these actions this year will make it more difficult to pass a balanced budget in the coming years," said Rep. Jay Obernolte, Republican of Big Bear Lake and vice president of the Assembly's Budget Committee.

The budget delays about $ 12.9 billion in payments to public schools, which means that districts can go ahead and spend the money now and the state will pay them later. Overall, schools will receive the same money they received last year, which means that most districts that lost students while schools were closed will not lose those dollars.

But that will hurt the few districts that grew during the pandemic, including charter schools that recruit students from families frustrated with distance learning options in traditional public schools.

Meanwhile, the budget temporarily raises taxes for some companies to generate additional revenue of $ 4.4 billion. Taxes apply primarily to companies that have more than $ 1 million in revenue.

California has already received billions of dollars in federal aid, and the budget Newsom signed on Monday spends that money in part, giving it to local governments to help care for the homeless and school districts to help reopen in the autumn.

But Newsom and legislative leaders urged Congress to send more money to the state. Although the state budget includes about $ 14 billion in cuts, the plan would automatically restore those expenditures if the federal government sends more aid to the state by October 15. The Democratic-controlled US House of Representatives passed another round if aid to state governments, but that proposal was stalled in the Republican-controlled US Senate.

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