Just months after projecting a surplus of $5.6 billion, Gov. Gavin Newsom walked through his plans to close a $54 billion shortfall on Thursday, as he presented California’s first budget proposal of the COVID-19 era.
The national economic upheaval brought on by this year’s coronavirus pandemic has resulted in a precipitous drop in state revenue, and public education constitutes the lion’s share of spending in California. Under Proposition 98 formulas, the guaranteed funding level for public schools and community colleges has declined by 23 percent, falling about $19 billion short of what was anticipated back in January.
Meanwhile, schools are facing increasing demands in the wake of the pandemic, and social distancing measures — such as having fewer students in a classroom — would require additional investments.
Newsom proposed to bridge the gap through a combination of cuts, deferrals, federal spending, flexibilities and the reallocation of dollars that were previously earmarked for paying down unfunded pension liabilities.
Each year, the May Revise allows the governor to present new spending proposals against updated numbers as lawmakers enter the home stretch of passing a budget. But in the wake of the COVID-19 crisis, this year’s presentation took on a new sense of urgency, with collapsing state revenue leading to difficult choices.
California has built up a “rainy day fund” in recent years. But that pot, which currently stands at about $16 billion, amounts to less than one-third of the current projected deficit.
Newsom said his plan reflects the state’s intent to protect public health, public safety and public education while providing assistance to struggling Californians.
“COVID-19 has caused California and economies across the country to confront a steep and unprecedented economic crisis — facing massive job losses and revenue shortfalls,” the governor said. “Our budget today reflects that emergency. We are proposing a budget to fund our most essential priorities — public health, public safety and public education – and to support workers and small businesses as we restart our economy.”