Confusion Reigns During California Legislature’s Review of Newsom’s Budget Proposal

The California Senate Budget and Fiscal Review Committee reviews Gov. Gavin Newsom's budget proposal in Sacramento, Calif., on Jan. 23, 2024. Travis Gillmore/The Epoch Times

SACRAMENTO, Calif.—In the first public discussions since California Gov. Gavin Newsom released his budget proposal for the 2024–25 fiscal year earlier this month, the state’s nonpartisan Legislative Analyst’s Office and lawmakers in both parties have expressed limited understanding of some parts of the plan.

Of particular concern is a lack of details related to $8 billion in proposed spending cuts for public schools and community colleges.

“The proposal needs further explanation,” Gabriel Petek, legislative analyst, said during the Assembly’s Budget Committee meeting on Jan 23.

Legislators, during the meeting, said if financial experts are having a hard time understanding the proposal, so, too, are they.

“If the legislative analyst has a hard time understanding this, I guarantee you others ... here do, too,” Assemblyman David Alvarez said.

Additionally, some senators, in their own separate Budget and Fiscal Review Committee meeting, repeatedly asked for further clarification on the issue from Erika Li, chief deputy director on budget for the state’s Department of Finance.

“This is really clear as mud,” Sen. John Laird said during the meeting.

A budget bill planned for introduction on Feb. 1 will offer more specific information about the education reduction, according to the finance department.

Known as trailer bills, legislation designed to clarify and supplement the budget bill will be introduced soon, according to the finance department.

“The trailer bill language will be really helpful once that comes out,” Ms. Li told The Epoch Times after the Senate committee meeting. “There will be a lot of vetting at the subcommittees that will also be helpful.”

About 61 subcommittee meetings are planned to discuss the proposals before the budget is adopted in June.

The $30 Billion Discrepancy

Differences in how much the state is currently in the red between the governor’s estimate, created by the state’s finance department, and the analyst’s office were also scrutinized by lawmakers.

The governor’s January proposal suggested a $37.9 billion shortfall, while analysts estimated $68 billion in a December 2023 report. Some of the difference is due to spending solutions by the governor, the analyst’s office told lawmakers.

Such leaves a gap of about $10 billion, according to analysts’ estimates. Potentially adding to the problem are weak cash tax receipts received in January, the analysts said.

“Revenue was $3 [billion] to $4 billion below what the administration estimated for January,” Mr. Petek told The Epoch Times after the Senate committee meeting.

Is Deficit Exodus Related?

Some Republican lawmakers noted that the revenue miss comes despite a stock market that recently set record highs.

Sen. Brian Dahle suggested the deficit is due to businesses and people leaving California.

“I believe it’s because businesses are leaving the state,” Mr. Dahle said. “It’s starting to catch up with us.”

Regulation and taxes are to blame, he said.

“It’s easier to do business in other places. And there’s less taxes, so we’re seeing an exodus,” he said.

While the analyst’s office acknowledged that outmigration could play a role, Mr. Petek said its impact is unclear, as the most recent Internal Revenue Service data is from 2021.

Once tax receipts arrive in April, Mr. Petek said, the state will have a better understanding of the fiscal situation, with May revisions presented by the governor and analyst’s office.

“We‘ll take what we learn and updates from the economic situation, and we’ll put those forecasts in our models,” he told The Epoch Times.

Making Difficult Decisions

In the meetings thus far, with billions of dollars promised and insufficient funds to fulfill obligations, legislators debated over how best to manage cuts.

For instance, Sen. Shannon Grove described a rural hospital crisis affecting the state. Community hospitals are struggling to get funding while electric vehicle agendas are fast-tracked, she said.

“We are not taking care of the people,” Ms. Grove said during the Senate committee hearing. “Our poorest people in our communities are going to be absent hospitals.”

Another lawmaker said the state is taking care of the wrong people.

“This budget prioritizes benefits to non-citizens over citizens who are suffering developmental disabilities and adequate help for hospitals,” Sen. Roger Niello, vice chair of the Senate Budget Committee, said during the same hearing.

California Sen. Roger Niello, vice chair of the Senate Budget and Fiscal Review Committee, asks questions during a meeting in Sacramento, Calif., on Jan. 23, 2024. Travis Gillmore/The Epoch Times

Others voiced concern about the proposed cuts to climate, housing, and other programs.

With the rooms nearly filled to capacity during both hearings, committee chairs noted the unusual interest in budget proceedings.

More than 50, who said they were illegal immigrants, attended the Senate meeting carrying orange and yellow silk flowers. One by one during the public comment portion of the meeting, they told their story in Spanish and requested support for a bill that would provide unemployment benefits.

Sen. Nancy Skinner, chair of the committee, ultimately stopped the group after several dozen of them spoke and requested that they enter written statements in support of that piece of legislation to save time.

Lawmakers Looking for Clarifications

Several lawmakers, of both parties, also were advised to be brief by Ms. Skinner, who suggested detailed questions be saved for a later date.

Describing his frustration with the governor’s proposal and desire to dig deeper, the vice chair said the budget is one of the most troubling he’s seen.

“Of a dozen budgets I’ve been involved with in local and state government, this is the most illusory,” Mr. Niello said.

His Republican colleague Ms. Grove suggested that the lack of clarity is derived from the finance department’s “queen of spin.”

Laughing off the moniker, Ms. Li told The Epoch Times it’s just a difference of opinions.

“I think there might be some misunderstandings and different perspectives.”