California Republicans urge spending cuts as state faces $68 billion deficit

(The Center Square) – In response so the state’s looming $68 billion deficit, California Senate Republicans urged governor Gavin Newsom to make immediate changes to the ongoing year’s budget beyond the already-initiated budget freeze, claiming “Failing to act now will lead to increased instability in future budgets and impact the functions and services the state provides.”

After the state’s nonpartisan Legislative Analyst’s Office announced the state entered a recession in March 2023 and would experience a $26 billion revenue shortfall in the 2022-2023 fiscal year, it also estimated that, absent any changes to spending, the state is likely to face a $68 billion budget deficit for the upcoming 2024-2025 fiscal year currently being planned for.

As a result of the LAO’s reports, Newsom initiated a budget freeze for the remainder of the ongoing 2023-2024 fiscal year, which means state agencies are directed to not enter any new contracts for goods and services, buy new IT equipment or vehicles, or travel outside of “time-sensitive or critical need.” There are exemptions for declared emergencies, avoiding significant revenue loss, and achieving significant net cost savings, but agency secretaries and cabinet-level directors are required to report on all approved exemptions as well as achieved cost-savings on a monthly basis.

However, given the estimated size of the 2024-2025 deficit, California Republicans say immediate changes to this year’s budget — not just a budget freeze — will be necessary to mitigate damage to the state’s finances and ability to provide critical services, and offered to work with the governor to do so.

“Making prudent adjustments to the current year’s General Fund budget would help prevent the fiscal condition of the state’s finances from getting worse,” wrote Senate Minority Leader Brian Jones, R–Santee, and Senate Budget Review and Fiscal Committee chair Sen. Roger Niello, R–Fair Oaks, in a letter to the governor. “Failing to act now will lead to increased instability in future budgets and impact the functions and services the state provides. Including accelerated action proposals in your January budget will help the state achieve this aim. Senate Republicans are ready to work with our legislative colleagues and your administration on a solution.”

State spending per-capita has increased 56% since governor Newsom took office in 2019, when the budget Facing a $32 billion deficit, Newsom already cut the 2023-2024 budget down to $308 billion, the second-highest budget on record, and may need to make further cuts to the already-adopted budget as fiscal pressures mount. Outmigration continues to threaten the state’s long-term economic prospects and tax revenue as families and business owners seek lower tax states where housing is more affordable.