How can a liberal and blue state governor take on the unattractive task of cutting budgets? By shifting a lot of pressure to the federal government.
In revising California’s budget to $ 203 billion today, Governor Gavin Newsom drew up a plan to fill a large deficit by tying many additional federal aid cuts. If the FBI comes with $ 1 trillion for state and local governments that are Newsom and other Democrats the governor has asked, California will not reduce funding for schools, colleges, parks, child care, health care and other programs.
“The president of the United States, with one stroke of his pen, can provide support for Nancy Pelosi’s HEROES Act and this deduction can be removed,” Newsom said, when he presented a proposal to close. a deficit of $ 54 billion caused by job loss during the coronavirus pandemic.
This is a strategic, if risky, course when Newsom heads to the sprint of budget negotiations with state lawmakers for the next four weeks.
On the one hand: the cuts proposed by Newsom are likely to bring out an outpouring of advocacy from sympathetic constituencies including teachers, firefighters and police who can influence decisions in the nation’s capital. Newsom enjoy old relationship to Speaker Speaker Nancy Pelosi, a San Francisco Democratic member whose father-in-law is a business partner with Newsom’s grandfather. And despite a dispute with Donald Trump that defines many of Newsom’s first years in office, he has developed a working relationship with the president. They have been in public praise each other since the pandemic began.
On the other hand: GOP Senate Leader, Mitch McConnell has done it refused Pelosi’s latest help package and before he said will not support “blue state bailouts”. “Federal assistance at the level Newsom wants – not to mention the approval before the state budget cuts will take effect on July 1 – is not certain.
“We need to have Plan B,” said Assembly Member Phil Ting, a San Francisco Democrat who chairs the Assembly’s budget committee.
“I don’t think we should just rely on the federal government … If federal money doesn’t come in, we have to think of other options before we make cuts.”
Ting’s colleagues in the state Senate sounded more optimistic that Congress would come and that Newsom’s proposed cuts would not occur.
“The programs he attaches to triggers hopefully will create extraordinary advocacy opportunities for the beneficiaries of those programs to reach our congressional representatives to ensure that the state gets the resources they need so that we don’t have to cut off those areas , “Said state Senator Holly Mitchell, a Los Angeles Democrat.
Indeed, within hours of the announcement of Newsom, the California Teachers’ Association began asking California citizens to call their Congress members and urge them through the Pelosi aid package.
MPs will now filter Newsom’s proposal before they have to issue a budget on June 15. Senator Jim Nielsen of Tehama quickly rejected Newsom’s approach, saying “relying on a federal bailout is not a budget solution.”
But Republicans are only a quarter of the Legislature, not a block big enough to have an effect on budget negotiations.
Most Democrats in the Legislature today have been elected since the last recession and now face their first dismal budget. Until the coronavirus outbreak, California has enjoyed the longest economic recovery since the Great Recession. After raising taxes in 2012, the country managed its finances carefully in good years, paying off the $ 35 billion “debt wall” from internal loan schemes and building significant reserves – all of which helped improve the country’s credit rating.
However, the retirement of civil servants since reported loss. It has local officials fear of service cuts, layoffs and even bankruptcy because state and local governments are obliged to contribute more – even when they have less. CalPERS, for example, shed $ 69 billion because global financial markets are recovering from a pandemic.
And former Governor Jerry Brown, an apocalypse who rowed the right of many legislative Democrats in seeking fiscal control throughout his second term, warned in his latest state budget that good times will not last forever.
“What’s there is darkness, uncertainty, decline and recession,” Brown said in 2018. “Good luck, dear!”
The Newsom Administration projects 24.5% unemployment, a 21% reduction in new housing permits and a nearly 9% decline in California personal income for the fiscal year beginning July 1. This was a turnaround from January, when the governor set an ambitious agenda that featured An A surplus of $ 5.6 billion.
Newsom acknowledged that all had disappeared “in the blink of an eye” as he walked back many of his January proposals. The governor dropped a plan to expand Medi-Cal’s health coverage to low income undocumented seniors over 65 – a move that could cause friction with legislative Democrats who hope to support communities more vulnerable to viruses.
“Immigrants are the backbone of our country and have served as important workers during this crisis,” female assembly member Lorena Gonzalez, a San Diego Democrat, said in a statement. “We are disappointed, but not surprised by the Governor’s actions to retreat in health for all.”
The crisis, however, can provide opportunities for Newsom. He has proposed closing one prison in the next five years. Now he wants to close two prisons, one in 2021 and another in 2022. That is likely to make it contradict the prison guards union that traditionally holds power in the Capitol, but if Newsom succeeds he will burn his progressive bonafide in future political campaigns.
In general, the governor called for bridging the deficit by canceling non-essential expenses, utilizing reserves and borrowing. Among the proposals:
- Canceling program expansion and spending of $ 6.1 billion, including stopping the payment of an additional $ 2.4 billion to the California Civil Service Pension System.
- Withdraw $ 16.2 billion from the state’s main rainy day fund over three years, and utilize safety net reserves to offset increased costs in health and human services programs over the next two years.
- Move $ 4.1 billion between accounts to help balance the budget, at least on paper.
- Temporarily suspend and limit the tax credit used by wealthy business and taxpayers. Specifically, deferred net operating losses and limit up to $ 5 million in the amount that taxpayers can claim in credit for a given tax year. The move will generate $ 4.4 billion in 2020-21 to increase funding for schools and colleges and maintain other core services.
California can see its taxpayers in other ways too, although it’s not clear whether voters will be interested in helping. Labor and education groups are pushes the November ballot to overhaul Proposition 13, California’s property tax limit, to help prevent steep cuts to local governments and public schools. The Schools and Communities First campaign estimates that this initiative could generate $ 12 billion a year by raising commercial property taxes.
Newsom does not yet support the proposal, which business interests strongly oppose, but said he did not rule out asking voters for some kind of tax increase.
“We are considering other approaches, including other income strategies,” he said. “We will continue talks with the Legislature, with leaders throughout and below the country and we hope we can help guide some consensus on what is most appropriate to be submitted to voters.”
Meanwhile, about 26% of Newsom’s budget solutions depend on cuts that it said would be eliminated if enough federal assistance.
“We do our best to help support people in need, but we now need the federal government to support not only the state of California, but other states throughout the country,” Newsom said. “If they do, if they meet now, we will be able to significantly reduce the stress and anxiety felt by many people.”
In other words: Washington, the ball is in your court.
CalMatters reporter Jackie Botts contributed to this report. CALmatters.org is a non-profit, non-partisan media venture explaining California policy and politics.
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