Newsom, California Lawmakers Agree To Budget Deal That Avoids Cuts To Health And Social Services

Gov. Gavin Newsom and legislative leaders announced they have reached an agreement over how to close a cavernous $54 billion deficit in California’s state budget, following more than a month of negotiations.

In a press release, the state’s top leaders say the agreement “protects core services – education, health care, social safety net and emergency preparedness and response,” though they did not provide spending details.

Legislative sources who were not authorized to speak publicly about the agreement say it avoids the deep cuts to education, health and social services Newsom had proposed in his May revision. Instead, it would cut hundreds of millions in funding for some departments, defer about $12 billion in spending to K-12 schools and community colleges and impose furloughs on state workers to save an additional $2.8 billion if anticipated federal aid does not materialize. 

For more than a month, the governor has called on Congress to pass a relief package for states and local governments struggling under the weight of budget shortfalls due to the pandemic and increased emergency spending. 

Newsom, Senate President pro Tempore Toni Atkins (D-San Diego) and Assembly Speaker Anthony Rendon (D-Lakewood) reinforced that request in their budget announcement. 

“It’s imperative for our federal partners to pass a responsible and comprehensive relief plan so states and local communities can continue to keep Americans safe while leading our national economic recovery,” their statement said. 

Newsom and legislators each wrote about $14 billion in anticipated federal aid into their respective budgets. But if it does not materialize, the state would cut hundreds of millions for state universities, courts and a smattering of other areas in addition to the education deferrals and furloughs. 

Legislative sources say the final agreement more closely resembles the placeholder budget lawmakers approved on their June 15 deadline than it does Newsom’s May revision, with one caveat: it does not draw down as much money from the rainy-day fund as lawmakers had originally proposed, instead budgeting the roughly $20 billion in reserve funds over several years, as Newsom recommended. 

The coronavirus pandemic has decimated the state’s coffers, forcing Newsom to cancel more than $6 billion in new spending he announced in his original budget proposal in January and look for other areas to slash. 

The budget incorporates some savings from Medi-Cal and CalWorks, which are forecast to have lower caseloads than anticipated. 

While the agreement includes language intending to fund Medi-Cal for undocumented seniors, that program will not be funded until a future, unspecified date. But in a bright spot for some of the state’s undocumented workers, the budget deal extends the earned income tax credit to those with children under the age six. 

While Newsom declined to provide many details of the budget agreement during a coronavirus press conference Monday, he said he intended to sign the budget, which is weeks in the making. 

“It’s a tough budget for all of us,” Newsom said Friday of the negotiations. “The magnitude of the shortfall is unprecedented in the state’s history.”