Gavin Newsom’s $203.3 billion California budget cuts school funding, spends reserves

California Gov. Gavin Newsom’s updated $203.3 billion budget proposal would cut school funding, cancel a planned boost in public pensions spending and draw down reserves to make up for a projected $54.3 billion budget deficit brought on by the coronavirus pandemic.

The plan, unveiled Thursday, reflects a sudden recession spurred by global efforts to slow the spread of the coronavirus that causes COVID-19. In California, about 4.5 million people have filed for unemployment since mid-March, when Newsom issued a stay-at-home order that shut down much of the state’s economy.

His office projects unemployment could peak at nearly 25 percent, roughly double the peak during the Great Recession.

“It goes without saying that these are not ordinary times,” he said. “We’re going to be dealing with challenges we haven’t faced in some time.”

The budget includes a significant decline in K-14 education funding, from $81.1 billion in last year’s budget to a projected $76 billion. The minimum amount required by California law would be $70.5 billion, but Newsom wants to add $4.4 billion from federal stimulus money the state has already received and use money that would have gone to extra pension payments to lessen the blow to schools.

Newsom’s budget proposes eliminating $2.4 billion in supplemental payments to California’s largest public pension plans, CalPERS and CalSTRS.

His revised 2020-21 budget plan would also reduce wages by 10 percent for California state workers and cut Medi-Cal services, including some dental and vision benefits.

Assembly Speaker Anthony Rendon, D-Lakewood, said the proposal reflects a “grim new reality.” Although “everything needs to be on the table” in terms of budget cuts and revisions, he’s concerned about the proposed education cuts and the 10 percent hit to state workers.

“I want to make sure that we are not only respecting state workers, but collective bargaining,” Rendon said. “You are looking at workers who are already suffering, so I am going to make sure we go through those details.”

Assembly Budget Chair Phil Ting, D-San Francisco, said lawmakers will have to make unpopular decisions to balance the budget by their June 15 deadline. While “none of these choices” laid out in Newsom’s plan are good, Ting said the governor’s framework will help the Legislature navigate budget negotiations in the weeks ahead.

“Nothing breaks my heart more than making budget cuts,” Newsom said. “There’s a human being behind every number. In every case, there is a dream that is deferred, in some cases denied.”

He appealed to President Donald Trump and congressional leaders to allocate more economic assistance for states.

“The president of the United States, with the stroke of a pen, could provide support for Nancy Pelosi’s HEROES Act,” he said, which would provide nearly $1 trillion for state and local governments.

The state would need that money by July 1, when the next fiscal year begins, to avoid many of the cuts Newsom is proposing, Newsom’s Finance Director Keely Bosler said.

The president has threatened to veto the proposal in the unlikely event it reaches his desk. Democrats and Republicans will have to reach agreement on a revised plan for it to become law.

“Federal government, we need you,” Newsom said. “These cuts can be negated. They can be dismissed with your support.”

Republicans largely applauded Newsom’s plan to reduce spending, but state Sen. Jim Nielsen, R-Tehama, said Newsom can’t depend on federal help to avoid deep cuts.

“Right now, when all of the states are hurting, that’s not a timely occasion to use that kind of strategy,” he said. Nielsen said economic recovery will depend instead on letting businesses reopen and softening the stay-at-home order.

In the meantime, Newsom is proposing to spend more than $16 billion from the state’s so-called rainy day fund by over the next three years to offset cuts.

His office expects revenue to the state general fund — which supports education, public safety, prisons and many social services — to fall $41.2 billion below his January budget proposal. At the time, he proposed new funding for preschools, homelessness and health care programs that would benefit undocumented seniors.

His revised plan erases the “overwhelming majority” of those proposed spending increases, Newsom said, including a plan to allow undocumented people over age 65 to sign up for state health insurance. But he still wants continued funding for tuition waivers at community colleges, student financial aid and a newly expanded tax credit for low-income households, as well as a fee waiver for new businesses.

The pandemic-driven job losses have disproportionately hit low-wage jobs, according to Newsom’s Department of Finance, widening the gap between the rich and the poor. The department estimates personal income will drop by nearly 9 percent and housing construction permits will drop more than 21 percent.

Senate President Pro Tem Toni Atkins, D-San Diego, said this week she is aiming to negotiate a balanced budget that will set the state on track for a recovery when the outbreak passes.

“We will not look to just cobble together a budget that is precariously balanced for 2020-21, but instead pass a budget with a projected balance in 2021, 2022 and a stronger projection beyond that,” Atkins said.

This story was originally published May 14, 2020 at 12:03 PM with the headline "Gavin Newsom’s $203.3 billion California budget cuts school funding, spends reserves."