On Saturday, Governor Gavin Newsom signed California’s budget to address an estimated $46.8 billion deficit by implementing $16 billion in spending cuts and temporarily raising taxes on certain businesses.
The budget was passed by lawmakers on Wednesday following an agreement between Newsom and legislative leaders. Both sides made compromises and achieved victories, although they also had to scale back or delay some progressive policies for the second consecutive year. These policies had initially been fueled by record surpluses during the COVID-19 pandemic.
“This is a responsible budget that prepares for the future while investing in essential programs that benefit millions of Californians daily,” Newsom stated.
“Thanks to careful management of the budget in recent years, we are able to address this challenge while maintaining our progress on housing, homelessness, education, healthcare, and other priorities that are crucial to Californians.”
Joe Biden talks in a campaign (Via Jim Moore/Getty Images)
The deficit was approximately $32 billion in 2023 before increasing this year, with further deficits anticipated in the future for the nation’s most populous state. Saturday’s signing occurred just two years after Newsom and Democratic lawmakers celebrated surpluses exceeding $100 billion, largely due to substantial federal COVID-19 aid and a progressive tax system generating significant revenue from the state’s wealthiest residents.
However, these revenue gains were not sustained as economic growth slowed due to inflation, leading to higher unemployment rates and a downturn in the tech sector, which has been a major driver of California’s economy. The Newsom administration also underestimated California’s financial resources last year following a seven-month delay in the tax filing deadline.
