No Additional Tax amid $80 Billion Budget Deficit: Newsom Announce

Newsom’s budget pledges to avoid imposing any additional taxes, yet it includes $15.2 billion in cuts to address the $80 billion deficit.
California Governor Gavin Newsom made a commitment to avoid implementing any additional taxes in his 2024-2025 budget. He revealed that the state’s financial shortfall is $7 billion more severe than initially projected in January. To address this, he suggested $15.2 billion in budget reductions to tackle a potential deficit of up to $80 billion. Newsom’s proposed budget adjustments involve decreasing water storage capacity and reducing the number of inmates in the state’s prisons by 4,600.
In January, Governor Newsom revealed a projected budget deficit of $37.9 billion, which was lower than the estimate of up to $73 billion provided by the non-partisan Legislative Analyst’s Office, which is funded by the state. According to Governor Newsom, recent data indicates that the state’s budget shortfall will be $7 billion more than initially projected in January. This suggests that the state’s deficit could potentially reach as high as $80 billion.
After taking into account this amount and Newsom’s $17.3 billion “early action” bill, which reduced spending by $3.6 billion and postponed the rest to future years, the governor’s projected deficit for the 2024-2025 fiscal year stands at $27.6 billion.
Considering the circumstances, Newsom has put forward a plan that includes $15.2 billion in cuts, $4.2 billion from reserves, $14.8 billion in programme expansion pauses and shifts, and $7.5 billion from borrowing and non-tax revenues. This strategy aims to generate a $3.4 billion surplus for the 2024-2025 fiscal year.
It’s puzzling why $4.2 billion was withdrawn from reserves to create a $3.4 billion surplus, rather than taking out only $800 million.
Newsom also stood by the decision to extend Medi-Cal coverage to undocumented immigrants in the state. This move is projected to increase the number of beneficiaries by 700,000, with an estimated cost of $3.4 billion in fiscal year 2024-2025, averaging nearly $5,000 per person.
“We are committed to ensuring that everyone has access to healthcare, regardless of their ability to pay, pre-existing conditions, or immigration status,” stated Newsom.
Newsom’s significant savings result from reductions in state-funded broadband investments, water storage spending, facility grants for transitional kindergarten spaces, and the state childcare expansion.
Annual savings of $80 million will be achieved by reducing prison capacity by 4,600 inmates and closing other prisons ahead of schedule. Additionally, the Middle Class Scholarship programme will provide $510 million in savings for students pursuing a teaching credential with family income and assets up to $217,000.
Newsom’s May budget included an increase in per-student spending compared to his January budget, with $23,940 allocated in May compared to $23,519 in January.
Newsom has put forward a proposal to establish a fresh account that would help avoid the spending of expected revenue before it actually reaches the state treasury. This practice, which is currently in place, has caused financial challenges when the anticipated money fails to materialise.
Furthermore, as home insurance rates continue to increase and insurers exit the state due to their inability to raise rates quickly enough to offset losses, Newsom has suggested expediting the insurance rate filing process. While this may encourage more insurers to remain, it does not effectively tackle the root cause of the rising rates and losses caused by wildfires.
In May, the governor revises the budget proposal after considering additional financial data and feedback from the legislature. Legislators in California are required by law to pass a balanced budget by June 15 in order to continue receiving their pay.