(PatriotWise.com) — California’s budget agreement, which was signed in late June by Governor Gavin Newsom, is the state’s attempt to close the estimated $46.8 billion projected deficit for the coming fiscal year by cutting nearly 8 percent from every department’s budget and temporarily raising taxes on some businesses.
The governor and the Democrat-controlled legislature agreed on a $297.5 billion budget covering both FY2025 and FY2026, which Newsom described as a “budget year plus one” proposal to curb spending over the next two fiscal years.
The budget dials back or delays some of the Democrat-controlled state’s more progressive policies that were fueled by California’s record surpluses during the pandemic.
The budget closes the deficit through a combination of cuts and other financial gimmicks, like internal borrowing from special state funds and $13.6 billion in additional tax revenue. It also reallocates roughly $5 billion in spending while deferring or delaying more than $5 billion in payments and drawing more than $12 billion over the next two years from California’s so-called rainy-day fund.
The 7.95 percent budget cut in every department is expected to save an additional $2.2 billion. Another $1.5 billion will be saved by cutting every department’s budget to fill vacancies.
Various affordable housing programs also face cuts amounting to $1.1 billion, while the California Student Housing Revolving Loan Program, established in 2022, will be cut by $500 million. This program gave interest-free loans to colleges and universities to build affordable student housing.
Governor Newsom said that the budget would bring “long-term fiscal stability” to the state while addressing the current deficit and “strengthening budget resilience” in the future.
Newsom insisted that the budget would ensure key programs like healthcare, education, and fighting California’s homeless crisis would be preserved.
California’s budget deficit was roughly $32 billion in 2023, just two years after Democratic leaders were boasting about budget surpluses totaling over $100 billion that were fueled by the state’s new progressive tax code as well as the hundreds of billions received from the federal government during the pandemic.
Copyright 2024, PatriotWise.com
