California Governor Gavin Newsom is set to announce the revised budget for the 2024-25 fiscal year before May 14th, which is scheduled to be passed by the June 15th deadline as mandated by the state constitution. The projected budget deficit is expected to exceed the $380 billion announced by Newsom in January.
According to the Governor’s Budget Office, following the April tax filings in California, state revenues decreased by $5.6 billion (approximately 4%) compared to the estimated $146 billion in March. Individual income tax decreased by $3.4 billion, corporate tax revenue dropped by $1.4 billion, and sales tax was down by $1 billion.
Since taking office, Governor Newsom has consistently increased the annual budgets significantly. The budget for 2020-2021 was $215 billion, followed by $227.2 billion in 2021-22, $286.4 billion in 2022-23, and $306.5 billion in 2023-24.
However, in January, Newsom proposed a $291.5 billion budget for the 2024-25 fiscal year, a reduction of $15 billion compared to the previous year. Despite the Legislative Analyst’s Office predicting a massive $68 billion deficit for this fiscal year in December, the Governor trimmed some expenditures in the budget and tapped into state reserves, bringing the deficit down to $380 billion.
In addition to cutting some appropriations, Democratic proposals in the state legislature include shifting wage expenditures from June 2025 to July, thereby moving tens of billions of dollars in deficit to the following fiscal year. Borrowing from special funds or other funds, such as extracting $13 billion from state reserves, has been suggested to address the current fiscal year’s shortfall.
The Legislative Analyst’s Office updated its forecasts this year. According to CalMatters, Legislative Analyst Gabe Petek believes that based on Newsom’s January budget, the actual deficit should be $580 billion, and the existing revenue shortage will further worsen the situation, with an estimated deficit possibly reaching $730 billion.
It is estimated that the revisions proposed by the Governor by mid-May may result in budget cuts, with the deficit exceeding the $380 billion from January but likely falling short of Petek’s $730 billion estimate. Nevertheless, the transformation from a budget surplus in 2023 to a massive deficit in 2024 is an undeniable reality for California. The Legislative Analyst’s Office predicts that the deficit will continue to expand during the remainder of Newsom’s tenure.
In early April, Newsom and the overwhelmingly Democratic California legislators reached an agreement to cut a $17 billion deficit through a series of reductions and deferred payments. The agreement suggests cuts of $3.6 billion in welfare, climate projects, and some school areas, as well as planning for deferred payments totaling $5.2 billion including $5.2 billion for public transportation, borrowing $5.2 billion from state funds, and diverting $3.4 billion from funds other than the General Fund.
In a news release on April 4th, Newsom stated, “Due to responsible fiscal management over the past few years, including a record near $380 billion budget reserve, we are able to address this challenge (deficit), but there is still work to be done as we finalize the budget.”
Democratic Assembly Speaker Robert Rivas expressed pride in the core Democratic group in the legislature for their commitment to a transparent and cautious budget process, and the Governor is expected to present a “challenging budget proposal” in May.
However, Republican lawmakers in the state legislature oppose the agreement, labeling it a “gimmick.” Minority Leader of the State Assembly, James Gallagher, released a statement on the same day, calling the agreement a “Democratic dancing and mistake,” stating that the extravagant agreement is not the home run Newsom thinks it is, and Californians will pay the price for Newsom’s fantasy and exaggeration.
In January, Minority Leader of the State Senate, Brian Jones, called on Democrats to stop providing funding for healthcare for undocumented immigrants to help curb the massive budget deficit. According to the budget proposed by the Governor in January, approximately 1.4 million undocumented immigrants in California are eligible for the Medi-Cal healthcare program, accounting for 9.5% of Medi-Cal cases in 2023-24.
As per the Legislative Analyst’s Office, the Governor’s 2024-25 budget will allocate $35.9 billion from the General Fund for the California Medi-Cal program, a $1.4 billion (3.8%) decrease from the previous year.
The California Medi-Cal program provides welfare services to low-income individuals, including families, elderly, disabled individuals, foster children, pregnant women, and non-parent adults with income below 138% of the federal poverty line. Due to budget cuts, it is estimated that the number of Medi-Cal enrollees in 2024-25 will decrease by approximately 1 million compared to the previous year, falling to 13.7 million, accounting for about 35% of California’s population.
On April 24th, the Governor and the Women’s Core Group announced that they would provide protection and services for abortion doctors and women in Arizona. Newsom, in the process of making California a sanctuary state for undocumented immigrants, spent taxpayers’ money, approximately $24 billion, to address the homelessness issue, with little apparent effect. ◇