To solve the $73 billion deficit, the Democrats in California have proposed a $2.1 billion budget cut.

Sacramento, CA: Despite a $73 billion deficit for the fiscal year of 2024–2025, Democrats in California only recommended a $2.1 billion decrease to the budget. Democrats expect to reduce the shortfall anywhere from $8.6 billion to $23.6 billion by combining a $12.2 billion deployment from the state’s rainy day fund with a $53 billion deficit figure. This is in contrast to the $73 billion deficit reported by the state-run, non-partisan Legislative Analyst’s Office.

State Senator Scott Wiener (D-San Francisco) and State Senator Mike McGuire (D-Healdsburg), who are both serving as president pro tempore of the state senate and budget committee chair, respectively, wrote in their “Shrink the Shortfall” proposal that the Legislature could immediately implement solutions worth several billion dollars to make the shortfall more manageable.

In his budget, which sparked negotiations with the legislature, California Governor Gavin Newsom proposed cutting $8.5 billion in spending and withdrawing $13 billion from reserves to address what he claimed was a $38 billion deficit. However, his deficit estimate was $30 billion lower than the Los Angeles Office of Management’s (LAO) then-$68 billion estimate, which has since been revised upward to $73 billion. This was due to the governor’s decision to assume $15 billion more in revenue and to use a $15 billion reduction in education spending as the new baseline.

The State Senate Budget Committee, which is comprised of Democratic members from California, arrived at the $53 billion deficit estimate by accepting Newsom’s $38 billion shortfall as accurate and including a Los Angeles Office study that indicated the deficit may increase by an additional $15 billion.

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Education would get $800 million, resources and energy $400 million, health and human services $1 million, general government $32 million, and public safety, transportation, and labor $822 million of the $2.1 billion in proposed spending cuts.

A total of $13.4 billion is saved by the state from its budget deficit thanks to the strategy, which includes $3.6 billion from taxes or bonds, $3.2 billion from fund changes, $2.5 billion from delayed spending, and $2.1 billion from deferred spending.

At the same time, the governor’s plan suggests a total of $26 billion in reductions, changes, postponements, and cancellations. There will still be a $54 billion deficit for the year even if Newsom and the California Democrats reach a compromise and propose savings of about $19 billion. The revenue imbalance could worsen in the face of increasing unemployment and a lower revision of the jobs data for 2023, which indicates that the state added only 50,000 jobs last year.

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