Gov. Gavin Newsom unveiled his revised state budget proposal Thursday, with deep cuts in education and health care funding as a result of the COVID-19 pandemic.
The $203.3 billion budget is nearly $20 billion less than Newsom’s initial budget proposal in January and includes about $6 billion in eliminated plans to expand programs like Medi-Cal, prompted by a roughly 25 percent drop in sales, personal income and corporate tax revenue.
According to Newsom, the state is saddled with a projected $54.3 billion budget deficit that it must balance over the next year while confronting an ever-mounting loss of tax revenue and an unemployment rate that state officials expect to peak at more than 24.5 percent.
“This is a multi-year responsibility,” Newsom said. “We can’t solve everything overnight without catastrophic cuts that are simply too much to bear.”
Significant funding expansions included in the January proposal such as extending Medi-Cal coverage to undocumented people living in the state and pouring funding into the state’s education system are absent from Thursday’s revised proposal.
Newsom said the state plans to use about $4.4 billion in discretionary funding from the federal Coronavirus Aid, Relief and Economic Security (CARES) Act to maintain education spending at current levels with adjustments for factors like inflation.
Newsom’s proposal calls for the state to pull from multiple funding reserves and surpluses to partially pay down the deficit, including using the entirety of the state’s $16.2 billion funding reserve over the next three years, using $7.8 billion during the 2020-21 fiscal year, $5.4 billion the following year and the remaining $2.9 billion the year after that.
The proposal also asks to use half of a $900 million safety net reserve and the entire $524 million surplus of the state’s Proposition 98 fund. All told, the state would pull about $8.8 billion from its reserves in the 2020-21 fiscal year to pay down the deficit.
Newsom said that at least part of the remaining $45.5 billion will hinge on the next federal stimulus package and how much aid is included for insolvent cities, counties and states. He also noted that some of the spending reductions and cuts outlined in the budget will be eliminated if the state receives enough federal funding support.
House Speaker Nancy Pelosi has proposed $900 billion in federal support for local and state governments as part of a new $3 trillion stimulus package, which Newsom praised.
“The federal government has a moral and ethical and economic obligation to help support the states,” Newsom said. “After all, what is the point of government if not to protect people, their safety and the well-being of citizens?”
The state Legislature must debate the proposal over the next month and approve a state budget by June 15, as outlined in the state Constitution.