Gov. Gavin Newsom on May 14 announced his plan to close the state's budget gap of more than $54 billion that was created by the COVID-19 recession.
“COVID-19 has caused California and economies across the country to confront a steep and unprecedented economic crisis – facing massive job losses and revenue shortfalls,” said Newsom. “Our budget today reflects that emergency. We are proposing a budget to fund our most essential priorities -- public health, public safety and public education -- and to support workers and small businesses as we restart our economy. But difficult decisions lie ahead. With shared sacrifice and the resilient spirit that makes California great, I am confident we will emerge stronger from this crisis in the years ahead.”
The May Revision proposes to cancel new initiatives proposed in Newsom's budget, cancel and reduce spending included in the 2019 Budget Act, draw down reserves, borrow from special funds, temporarily increase revenues and make government more efficient, Newsom said.
Due to the size of the challenge, there is no responsible way to avoid reductions, Newsom said.
He said the most painful cuts will only be triggered if the federal government does not pass another aid package that helps states and local governments; however, so far Republicans in Congress have not indicated that they would approve such a package.
Back in January, the state had a $5.6 billion surplus and record reserve levels. But now there is a $41 billion drop in revenues compared to January’s forecast. With a higher demand for social safety net services increasing state costs, the $54.3 billion deficit is more than three times the size of the $16 billion that had been set aside in the state’s Rainy Day Fund.
One of Newsom's most dramatic proposals is to cut state workers' pay by about 10 percent. He said negotiations will begin with the state's collective bargaining units, but the May Revision includes a provision to impose reductions if the state cannot reach an agreement, Newsom said.
In addition, nearly all state operations will be reduced over the next two years, and nonessential contracts, purchases and travel have already been suspended, the governor said.
The budget includes a 10 percent reduction to the Local Control Funding Formula, with a trigger for increases in case the states receive additional federal funding for education.
The California Teachers Association is concerned about the effect that a decrease in funding to schools would have on public education.
"More than $10 billion in proposed cuts will lead to cuts to vital student programs, educator layoffs, furlough days and pay cuts just like it did during the last recession when we lost 33,000 educators," CTA President E. Toby Boyd said in a statement. "Our students, our schools, our colleges, and our families cannot afford to go back."