California Democrats reject Newsom’s budget cuts, make a deal counting on money from Trump

Democratic leaders in the California Legislature announced a unified budget plan Wednesday that they said attempts to avoid “overcutting” as they face a projected $54.3 billion deficit brought on by the coronavirus pandemic.

Assembly Speaker Anthony Rendon, D-Lakewood, and Senate President Pro Tempore Toni Atkins, D-San Diego, announced the deal 12 days ahead of their June 15 deadline to adopt a budget.

It rejects about $14 billion in cuts Gov. Gavin Newsom proposed last month, in large part by relying on expected aid money that Congress has yet to pass.

The legislative plan proposes spending more from reserves, borrowing more money from internal accounts and delaying spending reductions until later this year. It’s similar to a plan the Senate Budget Committee passed last week.

Both houses of the Legislature must vote on it, and Newsom would have to agree to it for it take effect.

“Our economy has been pummeled by COVID-19, but thanks to a decade of pragmatic budgeting, we can avoid draconian cuts to education and critical programs, or broad middle-class tax increases,” Atkins said in a written statement. “Californians are counting on us to make the right call at the right time.”

The legislative plan relies on Congress passing an economic stimulus package for state and local government by Oct. 1. If that money doesn’t materialize, the plan would impose $7 billion in so-called trigger cuts.

“The key budget goal is preserving programs serving those who are most vulnerable. Nevertheless, all the budget plans being discussed acknowledge the possibility that more difficult cuts will be necessary, due to COVID spending needs and weak revenues,” Rendon said in a statement. “This will be especially true if Washington, D.C. doesn’t step up.”

Newsom’s plan, in contrast, includes $14 billion in cuts that would take effect if Congress doesn’t send more aid by July 1.

Before the coronavirus outbreak, Newsom’s office had projected California would accumulate a $5.6 billion budget surplus, enabling lawmakers to continue building reserves while expanding some social services.

In January, he proposed a $222 billion spending plan. His scaled-down revised budget, released last month, called for $203 billion in total spending.

His plan to close the deficit includes 10 percent spending cuts for California universities, $8 billion in spending reductions for K-14 schools and temporary pay cuts for public employees. He has appealed to Congress and the Trump administration to provide aid to avoid many of those reductions.

Rather than cut now, the Legislature’s plan relies first on the “strong likelihood” that federal assistance will materialize, said Assembly Budget Chairman Phil Ting, D-San Francisco.

The Democratic lawmakers’ proposal largely preserves funding for K-14 schools and higher education and even expands programs, like providing new Medi-Cal coverage for undocumented seniors beginning in 2022. If Congress doesn’t send more money, the lawmakers’ plan would pull back some of the funding for K-14 schools and universities, although by a smaller amount than Newsom’s proposal.

The Legislature is asking state public unions to give some concessions because of the deficit, but unlike the governor, lawmakers are not setting a 10 percent target for savings. Instead, their plan says they’ll reevaluate after unions and the Newsom administration make agreements.

Both plans by the governor and Legislature’s would change certain business tax rules to generate about $4.4 billion in revenue.

Ting said he anticipates a deficit for several budget cycles, and believes the Legislature will have to modify its budget during the fiscal year as the state’s finances become clearer.

“As long as COVID-19 is around, we are going to have to keep adjusting,” he said.

By law, lawmakers must adopt a budget by June 15, but can make additional changes through so-called trailer bills after that deadline.

“With today’s progress in the Legislature, we’ll continue our discussions to achieve an on-time agreement that balances the budget, reduces the structural deficit, sets the stage for recovery, and advances our efforts for federal support to maintain core services,” said H.D. Palmer, spokesman for Newsom’s Finance Department.

On Monday, Newsom declined to weigh in on the Senate’s proposal, but said his office was negotiating collaboratively with both houses of the Legislature. He said he’s confident they’ll reach a deal ahead of the deadline.

“All I can say is I appreciate the collaborative spirit,” he said. “I appreciate the work that the Senate is doing, the support that the Assembly is giving to this process. We continue to have very robust and very positive conversations.”

Although Republican leadership has not yet officially weighed in on the Democrats’ new plan, they criticized Newsom’s proposal in May for relying too heavily on federal money. Opposition from Republicans likely won’t sink the deal because Democrats have large majorities in both houses of the Legislature.

This story was originally published June 3, 2020 at 3:20 PM with the headline "California Democrats reject Newsom’s budget cuts, make a deal counting on money from Trump."