California faces $37Billion budget crisis as Gavin Newsom proposes slashing climate change programs, housing and clean energy spending for state

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Written By Maya Cantina
  • California Governor Gavin Newsom, 56, released details of California’s new $291billion state spending plan for the 2024-25 budget year on Wednesday
  • The nonpartisan Legislative Analyst’s Office predicted that California’s budget deficit would be $68 billion but Newsom said it was much lower
  • He proposed covering the deficit by tapping $13billion from reserves, trimming $8.5billion from programs and deferring some spending

California Governor Gavin Newsom has proposed slashing climate change, housing and clean energy programs in the state to plug an estimated $38billion deficit. 

The Democrat, 56, released details of California’s new $291billion state spending plan for the 2024-25 budget year on Wednesday. 

The nonpartisan Legislative Analyst’s Office predicted last month that California’s budget deficit would be $68 billion but Newsom said it was much lower. 

He proposed covering the financial shortfall by tapping $13billion from reserves, trimming $8.5billion from programs, deferring some spending to the future and spreading it out over more years. 

Newsom’s plan includes $8.5 billion in spending cuts, with about half of those cuts spread across various housing and climate programs. Liberals have long pushed climate change and housing programs as part of their agenda.  

California Governor Gavin Newsom has proposed slashing climate change, housing and clean energy programs in the state to plug an estimated $38billion deficit

He proposed covering the financial shortfall by tapping $13billion from reserves, trimming $8.5billion from programs, deferring some spending to the future and spreading it out over more years. Pictured: Solar panels set up across the Mojave Desert

He proposed covering the financial shortfall by tapping $13billion from reserves, trimming $8.5billion from programs, deferring some spending to the future and spreading it out over more years. Pictured: Solar panels set up across the Mojave Desert

Newsom will now spend the next six months negotiating a final plan with the Legislature, which is also controlled by his party. The budget year begins July 1. 

The decline in revenue comes from drop in the stock market and delayed tax collection last year because of winter storms, according to the San Francisco Chronicle.

Newsom vowed not to roll back his previous major spending commitments — including free kindergarten for all four-year-olds and free health insurance for all low-income adults regardless of their immigration status.

But he wants the Legislature to consider delaying a planned minimum wage increase for healthcare workers in years when there isn’t enough money in the budget to pay for it — something he said lawmakers agreed to in advance before he signed the law last year.

The governor stopped short of calling California’s budget deficit a ‘crisis.’ But his plan to cover the deficit includes pulling more than $13 billion from the state’s reserves — an action that will require him to declare a ‘fiscal emergency.’ 

Legislative Analyst Gabriel Petek said he thought Newsom’s estimates were reasonable, but added ‘they fall on the optimistic side of what we consider most plausible.’ He added his office stands by its estimate. 

The rest of the deficit will be covered by a combination of delays, deferrals, borrowing and shifting expenses to other funds.

Newsom, who has been mentioned as a future presidential candidate, proposed to cut $2.9 billion in climate change spending, including $40 million from a program that helps local and regional governments fight the impacts of extreme heat and $23.5 million for a pilot program to deploy zero-emission trucks that transport goods from ports.

The governor also plans to postpone until 2027-28 some $600 million in spending for programs to help motorists replace gas vehicles with hybrid and zero-emission versions. 

He’s keeping a $1.4 billion plan to conserve 30 percent of the state’s lands and coastal waters. However, the plan delays $200 million until 2026-28 on rebates to homeowners who install solar panels.

The proposal maintains spending on expanded mental health services, another Newsom priority, and includes funds for wellness coaches for children and youth.

It largely keeps intact a $1.5 billion program to help counties find housing for homeless people with serious mental illness and substance use disorders, but it delays $235 million in spending to 2025-26.

The Democrat , 56, released details of California's new $291billion state spending plan for the 2024-25 budget year on Wednesday

The Democrat , 56, released details of California’s new $291billion state spending plan for the 2024-25 budget year on Wednesday

Newsom will now spend the next six months negotiating a final plan with the Legislature, which is also controlled by his party. The budget year begins July 1

Newsom will now spend the next six months negotiating a final plan with the Legislature, which is also controlled by his party. The budget year begins July 1

Newsom wants to spend $126.8 billion on public schools — about $2.4 billion less than last year. But the cut could have been far worse. 

A voter-approved law guarantees the state will spend a certain amount on public schools each year. 

Due to the state’s revenue declines, Newsom said that guarantee has fallen by more than $11 billion over the past three years.

But instead of cutting the public education budget by that much, Newsom is using money from a special savings account for public schools that voters approved in 2014 to make up the difference.

David Huerta, president of the Service Employees International Union California, said the union looks forward to working with Newsom and lawmakers ‘to ensure that these critically needed workforce investments are implemented.’

‘There are no deferrals, there are no claw backs of money school districts have already gotten, and not a single cut to ongoing permanent programs,’ said Kevin Gordon, a veteran lobbyist who represents public school districts. 

‘It just validates the governor’s huge commitment to public education. There’s a lot of grateful school districts out there today.’

Newsom vowed not to roll back his previous major spending commitments — including free kindergarten for all four-year-olds and free health insurance for all low-income adults regardless of their immigration status

Newsom vowed not to roll back his previous major spending commitments — including free kindergarten for all four-year-olds and free health insurance for all low-income adults regardless of their immigration status

California saw a population decline of more than one percent since the start of the COVID-19 pandemic, with an estimated 500,000 people leaving the state between April 2020 and July 2022

California saw a population decline of more than one percent since the start of the COVID-19 pandemic, with an estimated 500,000 people leaving the state between April 2020 and July 2022

Homeless tents are seen along Embarcadero Street during heavy rain in San Francisco earlier this year

Homeless tents are seen along Embarcadero Street during heavy rain in San Francisco earlier this year

State Sen. Roger Niello, a Republican representing Fair Oaks and vice-chair of the Senate budget committee, said he is concerned about the amount of spending Newsom wants to delay rather than looking for more places to make cuts. 

Newsom proposed to delay, but not cancel, $5.1 billion in spending for a variety of programs including facilities for

‘A real risk of not developing a sustainable spending plan is that the budget makes commitments that maybe it can’t follow up on if we do have severe continued deficits,’ he said.

California has suffered from a loss of tax as residents and businesses flee the state.

It was the state which lost the most residents in 2022 with a net loss of 341,866 people.

Residents have pointed to high tax, high rent, high costs of living and lax policies which have led to increased crime. 

While businesses have deserted California due to high taxation, heavy regulation and other business costs. 

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