California’s new finances covers $32 billion deficit with out touching reserves – MyStateline.com

SACRAMENTO, Calif. (AP) — California Gov. Gavin Newsom and the Democrats who control the state legislature late Monday agreed on how $310.8 billion will be spent over the next year and approved a plan that covering a budget deficit of nearly $32 billion without raiding the federal savings account.

The country’s most populous state has run a total budget surplus of well over $100 billion in recent years and has used that money to significantly expand government.

But that year, earnings fell as inflation soared and the stock market struggled. California derives most of its income from taxes paid by the wealthy, making it more vulnerable to economic changes than other states. Last month, the Newsom administration estimated that government spending would exceed revenue by over $30 billion.

The budget, which lawmakers are scheduled to vote on this week, will cover that shortfall by cutting some spending — about $8 billion — while delaying other spending and shifting some spending to other funds. The plan would raise $6.1 billion and set aside $37.8 billion in reserves, an all-time high.

“In the face of ongoing global economic uncertainty, this budget increases our fiscal discipline by increasing our fiscal reserves to a record $38 billion while preserving historic investments in public education, healthcare, climate and public safety,” Newsom said.

Republicans have criticized the budget as unsustainable, noting that it would likely leave the state in billions of dollars in deficits over the next few years. They said the state’s gasoline tax is due to be increased on Saturday, an automatic adjustment linked to inflation. Republicans have repeatedly tried to halt these increases, but to no avail.

“What do the Capitol Democrats have in store for you this holiday weekend? Higher Gas Prices!” Republican Assembly Chairman James Gallagher posted on Twitter.

Budget negotiations stalled over the weekend as Newsom sought major changes to the state’s building and permitting process. Newsom said the changes are necessary to speed up key construction projects, including expanding the state’s energy capacity and modernizing the state’s aging water infrastructure.

However, a group of Central Valley lawmakers feared that Newsom would use the proposal to push through a long-delayed project to build a giant tunnel to bring water to Southern California. In the end, Newsom got most of the changes he wanted — but lawmakers made sure the changes didn’t benefit the tunnel project.

The budget provides a lifeline for public transport operators struggling to survive after the sharp drop in ridership during the coronavirus pandemic. It allows transit companies to use a portion of the $5.1 billion in grants to operate over the next three years.

Still, some San Francisco Bay Area lawmakers said spending wasn’t enough to avert painful benefit cuts for years to come. On Monday they proposed legislation that would increase tolls on seven state-owned bridges — including the San Francisco-Oakland Bay Bridge — by $1.50 over the next five years. State Senator Scott Wiener, a San Francisco Democrat who supports the proposal, said it would generate $180 million in revenue.

Democratic Senator Steve Glazer said he would oppose any toll increase, saying in a statement, “Transport drivers and taxpayers have seen firsthand the trail of broken promises from advocates of a bridge toll increase.”

“The status quo is a failure and we shouldn’t invest another penny to support it,” he said.

The budget doesn’t add an income tax increase to cover the deficit, but it does impose a new tax on managed care organizations — private companies that contract with the state to administer Medicaid benefits. The tax would raise an estimated $32 billion over the next four years.

Some of that money would go towards increasing the revenue of doctors treating Medicaid patients. It would also offer $150 million in loans to hospitals at risk of failure. This is in addition to the $150 million approved by lawmakers earlier this year.

“In good years we have struggled so that we could meet our needs in this difficult year,” said Senate President Pro Tempore Toni Atkins. “This pragmatic approach works for household budgeting and it works for state budgeting.”