Lately, leaders from several cities and areas along California’s southern border have been reaching out for a helping hand from both the state and federal governments. Southern cities are feeling the financial pinch because of a recent surge in migrants arriving at the border. These calls for help are a result of the growing number of migrants local leaders have to deal with, from providing housing to essential services to free health care, especially after the number of migrants with severe injuries treated in local hospitals has been growing since the start of the year.
The problem
Taking care of migrants is hitting the border communities’ wallets hard. But they may not receive the financial support they desperately need because of the state’s huge budget deficit. In an effort to reduce the state’s staggering multibillion-dollar shortfall, state lawmakers have decided to cut spending but also combine delays and deferrals, hoping these moves will help balance the books. This move by the state lawmakers is expected to have an impact on the California economy, starting very soon.
How California got here
On Thursday, Democratic leaders confirmed they came up to a plan to cut the budget deficit by $17.3 billion after Gov. Gavin Newsom had enjoyed unprecedented surplus budgets of more than $100 billion throughout the COVID-19 pandemic. But the past two years have saddled him with a pair of multibillion-dollar deficits, a less-welcome position for a governor seen as a potential future Democratic presidential candidate.
The budget deficit expected to reach $73 billion
Last year, Governor Newsom and other officials managed to deal with a $32 billion budget gap without significant reductions in spending. Newsom and lawmakers managed this by making some smaller cuts, borrowing money, and delaying certain costs to later years. But this year’s deficit could be as large as $73 billion, according to the nonpartisan Legislative Analyst’s Office. However, Newsom pointed out in January that the actual gap was $37.9 billion, a number that’s challenging but more manageable given the state’s expected income of over $291 billion.
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The new plan
To tackle this problem, Newsom suggested using $13 billion from the state’s savings and reducing expenses by $8.5 billion in January. This reduction plan involved cutting funding for several housing and environmental initiatives. In March, Newsom and the Democratic leadership, who have a super majority in the legislature, said they’ve found a way to address the budget issues without giving out much detail. Their new strategy, aligning with earlier propositions from Newsom and the Senate, involves various measures.
Budget cuts on public transit, education
The strategy includes reducing spending by $3.6 billion, mainly affecting schools, welfare, and environmental programs, but sparing housing and homelessness programs from a $1.2 billion reduction previously considered. It also plans to postpone or delay around $5.2 billion worth of expenses in areas like public transportation and preschool facilities. Furthermore, it allows Newsom the option to hold back on some one-time funds that had been allocated in the budget over the past three years.
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Spending on migrants won’t be affected
After intense discussions, legislators approved a bill to raise taxes on health plans managed by organizations, a move expected to bring in $3.8 billion in the upcoming fiscal year. This strategy carefully avoids affecting the governor’s key budget priorities, such as offering free health coverage to low-income adults, regardless of their immigration status.
“We are able to meet this challenge thanks to our responsible fiscal stewardship over the past years, including record budget reserves of close to $38 billion,” Newsom said in a statement. “There is still work to do as we finalize the budget and I look forward to the work ahead together to continue building the California of the future.”
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Republicans left out of the solution
While Democratic lawmakers celebrated the new plan as a huge win and the right way to address the budget deficit, Republican lawmakers slammed the plan Thursday and said they were shut out of the conversation. “Our caucus has absolutely nothing to do with it,” Republican Sen. Roger Niello said Thursday. “We learn all of these things later on, at about the same time as our 8 million constituents.”
