California Gov. Gavin Newsom’s May Revise budget proposal offered few winners, and plenty of losers, Friday, as he unveiled an austere vision for state finances.
Newsom called for slashing more than $32 billion in one-time and ongoing spending, with reductions, cost shifts and delayed spending across a wide variety of state departments and programs.
The governor however presented a defiant stance at his press conference Friday, telling reporters that “we’re holding the line on unprecedented investments.”
State lawmakers and Newsom will hash out the details over the next few weeks. The Legislature is required to pass a balanced spending plan by June 15 and the governor must sign it before the new fiscal year begins on July 1.
Here is a look at who won and who lost under Newsom’s revised budget proposal:
Losers
State workers: While state workers dodged furloughs in this year’s tough budget, they didn’t emerge entirely unscathed.
Newsom announced that he wants a 7.95% cut to state operations beginning this next budget year. That’s in addition to the 10,000 vacant state worker positions that he wants to see eliminated.
“So we want a leaner government…streamlined government. We want to do what all of you are doing in your personal lives, all the businesses out there doing in their professional lives as well, and we think we can do that and still achieve outstanding outcomes,” Newsom said.
Public health: Despite being just a year removed from one pandemic, and amid growing concerns of a possible future one, Newsom has proposed slashing hundreds of millions of dollars from state and local public health spending.
The governor wants to see $52.5 million reduced from last year’s budget, and a further $300 million in ongoing spending reductions.
Asked about his proposal to cut public health spending amid pandemic concerns, Newsom offered a matter-of-fact response.
“We have a shortfall. We have to be sober about the reality of what our priorities are,” he said.
The governor’s proposal drew condemnation from those in the public health sector.
“Local public health officials are astounded that just one year after the COVID-19 public health emergency ended, the administration has proposed repeating the same mistakes that left public health departments under-prepared and under-resourced and communities of color so vulnerable,” said Michelle Gibbons, Executive Director of the County Health Executives Association of California in a statement. “The biggest lesson of COVID-19 is that waiting until a crisis to invest in public health is a costly and deadly mistake that we can’t afford to repeat.”
Cities that rely on homelessness grants: California has given out billions of dollars in flexible spending grants in recent years for local governments to put toward reducing homelessness. Mayors of large cities have praised the Homeless Housing, Assistance and Prevention program, or HHAP, and the flexibility it provides to spend money on as needed in their own communities, whether it’s standing up new shelters or placing people in interim housing. City leaders have asked Newsom and lawmakers to dedicate permanent funds to the program.
Instead, Newsom’s spending plan would cut $260 million from the next round of funding, which was slated to be $1 billion. It does not include funding for HHAP beyond that.
“That may not sit well with some, but we’re not seeing the results I want to see,” Newsom said.
San Diego Mayor Todd Gloria, who chairs the Big City Mayors coalition, said “California’s homelessness problem will only get worse” if the program is cut.
“If the state wants to reverse the trend of more people falling into homelessness, cutting off funding for programs that are keeping tens of thousands of people indoors and off the streets isn’t the way to do it,” Gloria said.
Child care providers: After years of increasing investments in child care for California’s low-wage workers, Newsom proposed freezing subsidies at their current level.
That means about 81,000 state-subsidized child care slots won’t be available for working parents as planned by 2026. The number is part of an agreement between the state and child care providers union to reach 200,000 subsidized child care slots.
Newsom’s administration estimates the freeze would save $1.4 billion over two years. “Right now we don’t want to cut programs but we want to hold the line,” he said.
Child Care Providers United, the union representing 40,000 workers in child and family care, ratified its first contract with the state in 2021.
“We cannot build a stronger economy when our lowest paid workers, including those working irregular hours, don’t have somewhere safe to send their children during their shifts,” said Yolanda Thomas, a child care provider in Contra Costa County and member of the CCPU negotiating team. “The state cannot fix our current budget outlook by making cuts to the safety net or balancing the budget on the backs of working families.”
Middle class students: Newsom’s budget proposal would slash scholarships for middle class students by $510 million, leaving $100 million in the program. The scholarship is open to undergraduates and students seeking teaching credentials at state universities with family income under $217,000.
Newsom said the program saw infusions of cash in recent years of state surplus. He characterized the cuts as “basically level-setting back to where it was.” He also expressed disappointment about cutting the scholarship fund, saying he “enthusiastically” supported its creation as lieutenant governor.
Winners
Taxpayers: Faced with a large deficit, state lawmakers and governors can cut spending, raise revenue, or do some combination of both. As governor, Newsom has strongly resisted general tax increases, and he once again declined to get behind raising taxes on individuals or businesses.
“I don’t see there’s real evidence and need right now to increase general taxes and put more burden on working folks,” he said.
Some progressive lawmakers have tried to raise taxes on businesses and wealthy earners, but none of those have gained traction over the governor’s opposition.
Newsom joked his resistance to tax increases was “subject to some random act of God” noting he had experienced “a number of those” crises over his five-plus years in office.
State workers: Despite a massive deficit, state workers managed to get through another year with no furloughs. Newsom’s budget proposal also maintains scheduled cost of living adjustments under existing union contracts.
“No furloughs, no layoffs. We’re not asking for wage cuts,” he promised.