A ‘no-cuts budget’: How California Democrats are trying to preserve programs despite deficit

Last week, powerful California lawmakers in the Capitol wore masks with a message: “Invest. Don’t cut.”

The masks underscored their preferences for how they want to navigate the unprecedented situation brought on by the coronavirus outbreak, which has forced the Legislature to implement new safety protocols and rethink the budget.

Even with an estimated $54 billion budget deficit looming, Democrats who control the California Legislature plan to pass a budget Monday that attempts to avoid slashing funds for education and health care by delaying cuts in hope of future economic relief.

“We’re proposing essentially a no-cuts budget. That’s what we’re going to be passing Monday,” said Assemblyman Rob Bonta, D-Alameda.

It’s a strategy they’ve pursued in the weeks since Gov. Gavin Newsom laid out a plan with roughly $14 billion in cuts that would be triggered if Congress does not send states more financial assistance. In response, Democratic lawmakers called Newsom’s proposed cuts “draconian” and laid out what they described as a more “empathetic” approach.

Democratic lawmakers argue that deep cuts to programs that help low-income people will cause more Californians to rely on government assistance and become homeless, trends that will cost the state more in the long run.

The recession brought on by the coronavirus pandemic has widened the divide between the rich and the poor and created a greater need to fund the government’s safety net programs, said Assemblywoman Lorena Gonzalez, D-San Diego. Gonzalez also wore one of the masks last week, which were provided to lawmakers by Service Employees International Union.

Instead of cutting, the state needs to be more creative in finding money to keep those programs going, Gonzalez said. She pointed to parts of the budget bill lawmakers plan to pass Monday that will suspend tax credits for businesses.

“We have gone on too long in a situation in which we make investments in corporations and companies and allow incentives to grow wealth at the top,” she said. In the meantime, she says education has been under-funded and homelessness has increased.

In the 2008 recession, lawmakers made deep cuts to social safety net programs, which Gonzalez says was a mistake.

“Our working class never fully recovered from the 2008 recession,” she said. “If we let that happen again, we’re just going to be compounding income inequality.”

Asking Congress for help

A major difference between the lawmakers’ and proposal and Newsom’s revolves around cuts that are triggered if the federal government doesn’t step in.

Both the Legislature and the governor are calling on Congress to send them more money. Newsom, who had to make spending cuts during the last recession as mayor of San Francisco, proposed $14 billion in cuts that will take effect July 1 without the money.

Lawmakers are opting to spend more from reserves, defer payments that will still have to be made in the future and earmark about $7 billion in cuts that wouldn’t be triggered until Oct. 1 if Congress doesn’t approve another aid bill.

Legislative leaders announced last week that they have not yet reached a deal with Newsom to reconcile the two proposals, and will pass their own budget proposal Monday, the deadline for them to adopt a spending plan or risk losing pay, while negotiations continue.

To become law, Newsom would have to sign the budget into law by the end of the month, but he could veto the proposal. Newsom’s office declined to comment on the lawmakers’ plan.

Republicans favor spending cuts

Bonta said state lawmakers need to find ways to raise taxes on wealthy corporations and individuals. Future budget years “will have devastating cuts if we don’t find revenue,” he said.

Republicans argue that raising taxes and counting on more federal aid is the wrong approach to budgeting during the pandemic.

“It’s a hollow promise to anticipate substantial federal revenues,” said state Sen. Jim Nielsen, R-Gerber. “I understand the desire not to cut, but at the least, they should wait until there is actual revenue in the bank.”

Nielsen, the top Republican on the Senate Budget Committee said Democratic lawmakers are defaulting to the strategy of growing the government to solve problems, even in a recession. He described Newsom’s approach as “more responsible.”

Nielsen opposes spending more from reserves that he says the state will need down the road because the following year’s budget will also almost certainly have a deficit. Eliminating tax breaks for businesses will stifle economic growth, he says.

Instead, Nielsen and other Republicans want to see more cuts to state agencies to make them more efficient.

The Democrats’ strategy will make budgeting in the future even more painful, potentially resulting in even deeper cuts to the social services programs lawmakers in both parties say they want to protect, said Assemblyman Jay Obernolte, R-Big Bear Lake.

“If we don’t make those choices now, we’re just going to make choices more difficult down the road,” Obernolte said. “Every dollar in cuts that we defer is a cut that’s going to cost us more than a dollar to make in future years.”

This story was originally published June 15, 2020 at 5:00 AM with the headline "A ‘no-cuts budget’: How California Democrats are trying to preserve programs despite deficit."