California’s Democratic governor, Gavin Newsom, has released a revamped budget plan to address the state’s $32 billion deficit.
The state budget is in the black this year, but it will be in the red in future years because the state has promised to spend more money than it will collect from taxpayers.
Like other states, California relies upon high-income earners whose fortunes rise and fall with the stock market. Half of California’s state tax revenue comes from just 1% of the population. When the stock market is doing well, the state collects more taxes; however, high-income earners see their revenue drop when a recession seems imminent.
Newsom offered several solutions to the state’s budget shortfall in January, which the right has called “fiscal gimmicks,” including reclaiming monies that were never actually used for their intended purposes, such as tax rebates and energy bill assistance.
He’s closing the gap by redistributing funds, dipping into the state’s rainy-day fund, and taking out loans. Republican leaders in the legislature criticized Newsom’s proposal as further evidence of the Democrats’ reckless spending in Sacramento.
In January, Newsom planned to delay expanding a subsidized child care program, slash $500 million from a program that helped small companies pay higher tax rates connected with some state debt, and reduce funding for flood protection programs.
Last year, Newsom approved funding to help 20,000 families through a subsidized childcare program. Newsom has proposed postponing the money for a year while he navigates the difficulties he’s amassed.
That enraged several Democratic legislators, and Assembly Democrats on Monday called for an additional $1 billion in spending to raise childcare worker salaries.
In addition, green groups have demanded that Newsom undo a $6 billion reduction in funding for some of his pet climate initiatives.
State officials extended the tax filing deadline to October from April after a spate of severe winter storms caused considerable damage.
Newsom and legislators will have to formulate a plan without knowing how much money they have because of the delay in collecting taxes.
It’s so stressful and hard to spend other people’s money.