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California Dems propose $2.1 billion budget cut to address $73 billion deficit

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(The Center Square) – California Democrats proposed a mere $2.1 billion budget cut against a $73 billion deficit for the 2024-2025 fiscal year. Combined with a $12.2 billion deployment from the state’s rainy day fund, Democrats expect to reduce the shortfall anywhere from $8.6 billion to $23.6 billion, based on their use of a $53 billion deficit figure, not the $73 billion deficit reported by the state-run, non-partisan Legislative Analyst’s Office.

“The Legislature, right now, can make the shortfall more manageable by immediately adopting several billion dollars of proposed solutions,” wrote budget committee chair State Sen. Scott Wiener, D-San Francisco, and state senate president pro tempore Sen. Mike McGuire, D-Healdsburg, in their “Shrink the Shortfall” proposal.

California Governor Gavin Newsom’s budget, which set off negotiations with the legislature, called for $8.5 billion in spending cuts and $13 billion in reserve withdrawals against what he called a $38 billion budget deficit by estimating $15 billion more in revenue and counting a $15 billion cut in education spending as the new baseline — changes that bring the governor’s deficit estimate to $30 billion short of the LAO’s then-$68 billion estimate that has since been revised upward to $73 billion.

California Democrats’ State Senate Budget Committee’s $53 billion deficit figure comes from taking Newsom’s $38 billion deficit at face value and accommodating a LAO report finding the deficit could grow another $15 billion.

Of the proposed $2.1 billion in spending cuts, $800 million is to come from education, $400 million from resources and energy, $1 million from health and human services, $32 million from general government, and $822 million from public safety, transportation, and labor.

Combined with $3.6 billion in revenues or borrowing (taxes or bonds), $3.2 billion in fund shifts, $2.5 billion in delayed spending, and $2.1 billion in deferred spending, the plan reduces the state’s budget shortfall by $13.4 billion.

The governor’s plan, meanwhile, proposes $26 billion in combined cuts, shifts, delays and deferrals. Should the California Democrats and Newsom meet somewhere in the middle and propose roughly $19 billion in cuts, the state will still face a $54 billion deficit for the year. With rising unemployment and a downward revision in jobs figures for 2023 saying the state added just 50,000 jobs last year, it’s possible the revenue shortfall could grow even further.