California Gov. Gavin Newsom will unveil his plan on Wednesday to cover an astounding budget deficit, as the nation’s largest state deals with a revenue slump that could have serious consequences for 5,8 million children in public schools.
California enjoyed a budget surplus in excess of $100 billion just two years ago due to a booming stock market and federal aid for coronavirus. Last year, inflation caused the economy to slow down and resulted in a deficit of $32 billion. According to the latest estimate by the nonpartisan Legislative Analyst’s Office, this year’s deficit could reach $68 billion.
California’s law, unlike the federal one, requires that the state pass a budget that is balanced. This means it cannot spend more than it has. Newsom and legislators were able avoid major cuts in spending last year by a combination borrowing, making smaller cuts and deferring some expenses into future years. Newsom and legislators may be forced to make difficult choices as the deficit grows.
These decisions will be especially fraught, given that many legislators will ask voters this year to keep them in Sacramento. Newsom’s future political ambitions will influence every decision he makes. He could run for the presidency in 2028, after completing his term as Democratic Governor.
A deficit in the state could be bad news for its public schools. In a recession, it is difficult to avoid cuts to public schools because of a law that requires the state to allocate about 40% its budget to education. During the Great Recession public schools suffered deep cuts that led to school closures and layoffs. Many districts are still recouping from this.
According to the Legislative Analyst’s Office, the minimum amount California must spend on public school has decreased by $16.7 billion in the last two years. This means that lawmakers could reduce public school spending by this much to balance the budget.
California Gov. Newsom will speak in San Francisco, Thursday, November 9, 2023. On Wednesday, he is expected to reveal his plan for dealing with California’s massive budget deficit. (AP Photo/Jeff Chi File)
The public school system is also in a precarious position. In September, federal funding for coronavirus will expire. Districts that have become dependent on this money will need to replace it in their budgets.
Los Angeles is the second largest school district in the country. It has started to reduce its pandemic funding. Alberto Carvalho is the superintendent of Los Angeles Unified Schools District. He says that while its budget has decreased from $1.8 billion to $900 million, it still supports 1,800 full-time positions.
Carvalho stated that cuts to the schools “could prove quite disastrous,” noting that in the past year, many districts of the state signed new contracts with unions that included pay increases reflecting inflation. California’s school funding is adjusted annually to reflect inflation. It was a rise of over 8% last year. According to the Legislative Analyst’s Office, this year it could be as low as 2%.
He said, “That’s significant.”
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Carvalho, along with other school officials and advocates for education, are confident that this year’s lawmakers will not make drastic cuts to public schools. Robert Rivas is the new Assembly Speaker, and he’s presiding his first budget negotiations. He said last month that he would protect classroom funding.
“With a $68-billion problem, there will be some cuts.” Kevin Gordon, a lobbyist representing school districts, said it would be foolish to believe otherwise. “I think that they will do all they can to protect the school funding.”
Now, lawmakers have the resources that they did not have during Great Recession. Voters approved a special school savings account in 2014. According to the Legislative Analyst’s Office, Newsom and legislators could reduce school budgets by $7.7 billion and replace those expenditures with money from this savings account.
This would allow for the biggest savings. To save more, legislators could reduce one-time expenditures — money that was set aside in past budgets but hasn’t yet been spent.
California’s deficit budget could also be smaller than the $68 Billion estimated by the Legislative Analyst’s Office in early December. Stocks have recovered a bit. According to the Legislative Analyst’s Office, income tax withholdings – the amount employers deduct from workers’ paychecks each month to send to the state – are up slightly compared to last year but still below previous estimates.
It’s still enough to give Democrats some hope that the situation will be more manageable in May, once Californians file their tax returns and officials know how much money California has.
“We’re going have to make some difficult choices,” said Assemblymember Jesse Gabriel. He is a Democrat and the chair of Assembly Budget Committee. “We don’t yet know how hard they will be.”