Newsom Plans Severe Spending Cuts to Combat California’s Growing Budget Deficit

By: Georgia | Published: May 11, 2024

Governor Gavin Newsom has announced a proposal to significantly reduce spending in order to manage California’s growing budget deficit, now estimated at $45 billion. 

These proposed cuts will impact a range of services including education for kindergarteners and health care for immigrants and low-income parents, challenging the state known for its robust economy.

The Depth of the Financial Shortfall

Governor Newsom has publicly stated that the budget deficit stands at $27.6 billion. However, when accounting for prior spending cuts agreed upon in March, the actual figure approaches $45 billion

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Additional reductions in public education, which have not yet been included, could increase this deficit even further, according to a nonpartisan Legislative Analyst’s Office report.

Impact on National Politics and Personal Aspirations

The size of the deficit is particularly significant as it not only impacts California but also affects Governor Newsom’s national role as a major advocate for President Joe Biden’s reelection. 

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Governor Gavin Newsom speaking at a podium in a briefing room, with slides showing financial charts in the background and an audience listening intently

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This financial challenge comes after years of budget surpluses under Newsom’s administration, which have fueled speculations about his potential presidential ambitions.

Major Initiatives Remain Untouched

Despite the fiscal challenges, Governor Newsom has not yet made cuts to some of his major initiatives, such as free kindergarten for all 4-year-olds and free health insurance for all low-income adults, regardless of immigration status. 

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These programs represent substantial advancements in state policy under his leadership.

Details of the Proposed Cuts

Governor Newsom’s proposal includes significant reductions, such as discontinuing state payment for the care of 14,000 disabled immigrants, which would save approximately $94.7 million. 

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He also suggested cutting $550 million intended to help school districts build facilities necessary for expanded kindergarten services.

Child Care and Healthcare Adjustments

In a shift from earlier commitments, Governor Newsom has proposed pausing the expansion of child care services at 119,000 slots, down from a promised 146,000. 

A young child sitting on the floor playing with a colorful xylophone and other toys

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Additionally, a $6.7 billion allocation for improving Medicaid reimbursements to doctors has been canceled under the new budget plan.

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Responses to the Budget Proposal

The proposed budget cuts have sparked a range of reactions.

Governor Gavin Newsom smiling broadly at a podium with the California Republic seal in the background

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Anthony Wright, executive director of Health Access California, commented on the impact of the healthcare cuts: “Further impoverished or end up in much more expensive nursing home care.” Yolanda Thomas from Child Care Providers United also expressed concern, stating that the child care cuts mean “we cannot build a stronger economy when our lowest paid workers… don’t have somewhere safe to send their children during their shifts.”

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Governor's Reluctance to Make Cuts

Governor Newsom expressed his reluctance about the proposed reductions.

Governor Gavin Newsom speaking energetically at an outdoor event, wearing a casual jacket and a baseball cap

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He said, “I prefer not to make this cut. These are programs, propositions that I have long advanced, many of them. But you’ve got to do it. You have to be responsible.”

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Revenue Growth and Economic Changes

Before the pandemic, California’s revenues were consistently growing, but the post-pandemic period has brought financial challenges. 

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The state saw a remarkable 55% revenue increase during the pandemic, buoyed by federal aid and a booming stock market. These gains have now reversed, and the state must adjust to the new economic reality.

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The Challenge of Budget Forecasting

The Newsom administration has revised its revenue forecasts, now expecting $83.1 billion less for the fiscal years 2022-23 and 2023-24. 

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This significant shortfall highlights the difficulties in predicting financial flows and planning state budgets accordingly.

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Defense of Previous Budget Decisions

In defense of his administration’s financial management, Governor Newsom pointed out that the state Constitution mandated a return of a large portion of the surplus to taxpayers through rebates.

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He explained, “I feel like we were doing the best we could under that circumstance.”

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No New Major Taxes Proposed

Amidst these financial challenges, Governor Newsom has committed to avoiding major new taxes on individuals but proposes suspending a popular tax deduction for businesses. 

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He reassured that his budget plan would not lead to layoffs, furloughs, or salary cuts for the state’s employees, as part of his efforts to manage the budget responsibly without adding undue burden to the workforce.

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