Gavin Newsom Has Turned California into a State in Peril in Just Two Years

Just two years later, the state faces a staggering near $50 billion deficit. This swift reversal is straining California’s budget plans and testing its policy ambitions.

This move unlocks rainy-day funds and mandates tough budget cuts, complicating Newsom’s efforts to push forward his policy agenda.

As Newsom nears the end of his term, these figures could influence his future political ambitions.

“This agreement sets the state on a path for long-term fiscal stability — addressing the current shortfall and strengthening budget resilience down the road,” Newsom remarked.

This debate heats up as Newsom’s national ambitions grow.

These challenges have been intensified by the economic disruptions of the pandemic.

Investments in California’s tech industry have also dropped over the last two years, with 80% fewer companies going public in 2022 and 2023 compared with 2021. The number of unemployed people in the state had also risen by 200,000 since last summer.

Due to the delay of the 2022 tax filing deadline from April to November, California leaders were also cornered into building up the current budget without a complete understanding of the decline in state tax revenue.

This whiplash between a $100-billion surplus in 2022 and the current deficit compromises Newsom’s pride in California as the economic hub for the rest of the nation. Regardless, California still has more funds to dip into than before Newsom took office.

This intraparty tension underlines the complexities of governing a solidly blue state.

His current position as a presidential candidate may further complicate his need to get California back on track economically. Newsom himself has attempted to bat off rumors of his replacing President Biden as “unhelpful” and “unnecessary” but is currently the second-placed candidate for the presidency at 14%.

These cutbacks affect everything from housing budgets to prison funds. These are tough but necessary choices to regain financial footing.

This move has disappointed many but is seen as essential to averting more severe financial cuts.

Newsom explained a few weeks after signing the bill that he would not let the law come into practice if the state budget crisis deteriorated further. The law was estimated to cost the state $2 billion.

Doctors are at the forefront in the push for a measure on the 2024 ballot that would introduce a Managed Care Organization tax and have a portion of the revenue from that tax feed into providing a higher reimbursement rate for healthcare workers.

The greatest cuts in the education sector are the $500 million that have been slashed from a loan program to fund affordable student housing and $485 million for work-study programs.

However, the state of emergency Newsom announced allowed him to bypass the minimum funding guarantee for Californian schools and community college which was voted in by the public in 1988. The California Teachers’ Association has criticized this change to education funding as this would reduce funding to school by about $12 billion in two years.

Budget director Scott Graves questions the logic behind keeping empty facilities running: “Why are we spending a billion dollars a year to keep 15,000 beds empty in our state prison system? It’s a massive waste of resources.”

This lack of effectiveness, highlighted by a state audit, raises serious questions about accountability and results.

This would combat rising sea-levels and to help low-income Californians buy electric vehicles. This is in response to Newsom’s  $2.8 billion cut to a $54.3 billion spending package called the California Climate Commitment.

Representatives of Demand Side Grid Support and Distributed Electricity Backup Assets wrote in a letter to state legislative readers: “investing in these programs is an investment in California’s clean energy future and our resilience against the growing threats of climate change.”

By planning for the next two fiscal years and enhancing reserves, they aim to protect the state against future economic downturns, ensuring greater stability.

This includes a $97 million cut to trial court operations, $10 million to the Department of Justice’s Division of Law Enforcement and over $80 million to the Department of Corrections and Rehabilitation. This is the second year in a year that California has faced a shortfall of billions.

The new budget will suspend the net operating loss for companies with more than $1 million in taxable income and limit business tax credits to $5 million annually.