California to use surplus cash, delay school funds in budget

California lawmakers sent a $ 202.1 billion state budget to Governor Gavin Newsom on Friday, a spending plan designed to erase a historic deficit caused by the coronavirus crisis that relies heavily on cash reserves and a plan to multi-year payment to meet funding obligations to public schools.

The final votes in the Assembly came after the approval of the state Senate on Thursday night, reflecting the agreement reached between Democratic legislative leaders and the governor earlier in the week. Newsom is expected to sign the budget bills as soon as Monday and the deadline for the start of the state’s new fiscal year begins on Wednesday.

“We are in the midst of a global crisis and pandemic,” said Assemblyman Kevin McCarty (D-Sacramento). “And the choices we have to make here are not perfect.”

The budget cuts $ 13 billion in state government spending from the previous year’s level, almost exactly in the cuts proposed by Newsom in the plan he presented to lawmakers last month. But it differs from Newsom’s effort in how those savings are achieved, as it relies on fewer spending cuts, more late payments to schools and optimistic projections of future tax revenue, and costs of the health and human services program. .

“We have been able to reach an agreement that is pragmatic and balanced, thanks in large part not to the decisions we are making at the moment, but to [to] the responsible budget decisions we’ve made over the past decade, “Senate President Pro Tem Toni Atkins (D-San Diego) said Thursday.

Those decisions made in the past, setting aside billions in tax revenue, increased the size of the state’s cash reserve fund. The budget for the next fiscal year uses almost half of the $ 16 billion fund and anticipates withdrawing nearly $ 5 billion more over the next two budget years, leaving the balance of the main reserve fund at $ 2.9 billion early of the summer of 2023.

An additional $ 450 million will be withdrawn from a second reserve, one earmarked for health and wellness costs during an economic downturn. State expenditures to combat the COVID-19 pandemic would be covered by another $ 716 million in available cash.

Still, the budget cuts hundreds of millions of dollars in higher education, court operations, and housing subsidies. State workers will be fired for up to two days a month, part of a nearly $ 2.9 billion cut to employee compensation. Several planned expansions and changes in state health services were ruled out. The budget ignores the expansion of Medi-Cal to those over 65 who lack legal immigration status, a key priority for some Democratic lawmakers.

The decision to impose delays of 12 months or more on some of the state funding for K-12 schools and community colleges resulted in the largest solution to a deficit that Newsom estimated this spring at $ 54.3 billion. Lawmakers agreed to defer $ 12.5 billion in school funds that would otherwise have been required to be paid in the fiscal year ending next week, or the year 2020-2021. Many school districts will have to find some other way to secure the money missing in the intervention period, generally tapping on their own cash reserves or loans, with the state agreeing to pay those funds in the future.

But the cuts, lawmakers said, could have been worse. Overall, fewer state programs will see cuts tied to future federal aid for the coronavirus than Newsom originally envisioned. The budget lists $ 11 billion in spending cuts being made now, which can be reversed if Congress and President Trump send enough money to California in the early fall. That would mean more funding for education, housing, and county government services.

“We must urge the federal government to develop meaningful aid for state and local programs,” Assembly Speaker Anthony Rendon (D-Lakewood) said Friday.

Democrats praised the limited increase in budget spending as the key to protecting the state’s most vulnerable residents during the recession. Those increases include extending the California tax credit for low-income people without a Social Security number and with children under the age of 6, which would provide extra money to some residents without legal immigration status.

Republicans said many of the solutions in the final deal, one they complained they hadn’t seen until a private deal was reached between Democrats, are short-term solutions that do not provide sufficient structural balance for state finances. .

“I know it is difficult to make the cuts,” said Assemblyman Jay Obernolte (R-Big Bear Lake). “But our failure to make those difficult decisions this year will have serious consequences for us in the years to come.”

The state’s annual budget is written in a series of bills, most of which will be on Newsom’s desk over the weekend. Over the past quarter century, an increasing number of those bills have enacted policies that may have only a small link to government services and revenues for the coming year. Most are rarely seen before being published, as required by law, 72 hours before a final legislative vote.

One of those provisions in a public safety budget bill led to a lengthy debate Thursday night in the Senate: an expanded definition of what constitutes an assault weapon in California. The language of the bill was designed to include a specific weapon sold by a Nevada weapons manufacturer that is not marketed as a rifle, shotgun, or pistol and is therefore not subject to existing state restrictions.

The company, Franklin Armory, describes the “Title 1” weapon on its website as a “long gun for the Golden State” and one available to gun owners who live anywhere “where the modern sports rifle is castrated more beyond understanding. ”

State Senator Brian Jones (R-Santee) said the gun ban should have been fully vetted by a legislative policy committee so that “there is a legitimate conversation” that “gives the public an opportunity to voice their opinion on this type of theme”. “

That attracted a sharp response from state Senator Nancy Skinner (D-Berkeley), who chairs the Senate Public Safety Committee.

“What this does is it allows us to keep catching up with these manufacturers who are constantly trying to evade the state of California [assault weapon] law, “he said.” Every individual vote on a budget, whether in dollars or in words, is a political act. “

Others expressed concern about changes to the public safety budget bill in prison sentences, which include redefining “probation for the elderly” that begins in some cases at age 50 instead of 60.

On Friday, however, the Assembly refused to accept the bill and sent it back to the Senate. Some lawmakers expressed concern about a provision that gives judges new discretion in handling some minor crimes. The Assembly’s decision leaves all of the bill’s public safety proposals in limbo.

The budget bill package, expected to be in place in time for state government operations to flow smoothly, is unlikely to be the last word from lawmakers on how to tackle the economy weakened by the California coronavirus. A key factor in each year’s budget deliberations in Sacramento, personal income tax receipts paid before April 15, remains a mystery.

Newsom cited the burdens of the public health crisis when he extended the taxpayer deadline to July 15, meaning that a significant component of the state’s revenue outlook could lead to additional budget action before the Legislature suspends the year in early September.