California Governor Gavin Newsom signs budget to close $46.8 billion budget deficit

Governor Gavin Newsom signs California's budget, which will close a projected $46.8 billion deficit by cutting $16 billion in spending and temporarily raising taxes on some businesses.

SACRAMENTO, Calif. — Gov. Gavin Newsom signed California's budget on Saturday that provides for closing a projected $46.8 billion deficit by cutting $16 billion in spending and temporarily raising taxes on some businesses.

Lawmakers passed the budget Wednesday following a deal between Newsom and legislative leaders that offered concessions and wins for both sides even as they were forced for a second consecutive year to roll back or delay some progressive policies that were spurred by record-breaking surpluses during the COVID-19 pandemic.

“This is a responsible budget that prepares for the future while also investing in foundational programs that benefit millions of Californians every day,” Newsom said in a statement. “Thanks to careful budget management over the past few years, we’re able to meet this moment while protecting our progress on housing, homelessness, education, health care, and other priorities that matter so much to Californians.”

The deficit is projected to be nearly $32 billion in 2023, widening even more this year, with even bigger deficits projected in the future in the nation’s most populous state. Saturday’s signing comes just two years after Newsom and Democratic lawmakers boasted about a surplus of more than $100 billion, the product of hundreds of billions of dollars in federal COVID-19 aid and a progressive tax code that generated a bigger share of revenue from the state’s wealthiest residents.

But that revenue boom didn’t last long as inflation slowed the economy, leading to rising unemployment and a slowdown in the tech industry that has largely dampened state growth. That’s after the Newsom administration miscalculated how much money California would have last year after delaying tax filing deadlines by seven months.

California has historically been prone to big budget fluctuations because it relies so heavily on its wealthiest taxpayers. But these deficits come at a bad time for Newsom, who is working to build his national image ahead of a possible future presidential run and has been tapped as a top surrogate for President Joe Biden's campaign.

The budget includes an agreement that Newsom and lawmakers will try to change the state Constitution to allow California to set aside more money for future shortfalls.

However, Republicans said they were left out of the conversation. They criticized the tax hike on businesses, which applies to companies with at least $1 million in revenue and would last for three years, generating more than $5 billion in additional revenue for the state next year. And they criticized Democrats for some cuts to social safety net programs.

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