Frustrated by years of partisan bickering that often delayed the state budget, California voters in 2010 made a big change to the state’s Constitution: Lawmakers must pass a state spending plan by June 15 or else they forfeit their six-figure salaries.
Since that change — along with another one allowing lawmakers to pass spending plans with fewer votes — California’s budgets have been on time.
But this week, for the second year in a row, the Democratic-dominated Legislature has reached the June 15 deadline without an agreement with Gov. Gavin Newsom. The result is lawmakers on Monday passed a state budget that likely won’t become law in its current form. Instead, it lets lawmakers keep getting paid while giving Democratic leaders more time to negotiate with Newsom ahead of the actual budget deadline: June 30, or the end of the state’s fiscal year.
“This is a fake budget,” Republican state Sen. Jim Nielsen declared Monday during a legislative committee hearing. “It’s a feel-good budget, it’s a let-us-get-paid budget. But what we are voting on is not going to be the budget.”
Democratic Sen. Nancy Skinner, chair of the Senate’s budget committee, bristled at Nielsen’s comments. While the budget lawmakers approved Monday will be amended, it does show that lawmakers and the governor agree on more things than they disagree.
Both budgets would return $8.1 billion to most taxpayers in the form of rebates of up to $1,100 per person. Both budgets would pay for every 4-year-old in California to attend a two-year kindergarten program for free. And both budgets would spend $3.7 billion to address the drought.
“I feel good about this budget. This is not a fake budget,” Skinner said.
The biggest disagreement between Newsom and legislative leaders seems to be how much money to spend in the future. State budgeting during normal times is a guessing game, with leaders deciding how much to spend by predicting how many tax dollars they will collect over the next year.
The coronavirus pandemic has made it even harder to do this. Last year, Newsom and state lawmakers thought they would have a $54.3 billion deficit. Instead, revenues grow by 27%, the biggest increase in more than 40 years. When combined with federal coronavirus aid, California has more than $100 billion of new money to spend.
Newsom wants to be cautious. He says the state should spend most of that money on things that don’t require ongoing funding, just in case the money isn’t there in the future.
“This last year reminds us that we need to plan for the unexpected,” Newsom said in a news release. “We must maintain a strong fiscal foundation that does not overcommit the state to long-term spending it cannot afford, which could lead to future cuts.”
Democratic leaders, however, say they are OK with taking on more risk. Their budget assumes the state will have $20 billion more to spend over the next few years than Newsom’s does.
That’s why their budget plan would, for the first time, give local governments $1 billion per year to combat homelessness. It would also spend $1.3 billion per year to give government-funded health insurance to low-income adults who are 50 and older and living in the country illegally. Newsom’s proposal would do the same, but only for people 60 and older.
And it would spend more than half a billion dollars by 2025 to eliminate some administrative fees people must pay when they are charged with a crime or paying a traffic ticket.
“That’s going to be able to keep money in the pockets of regular working people,” said Sen. Maria Elena Durazo, a Democrat from Los Angeles.
Legislative Analyst Gabriel Petek, who runs the nonpartisan Legislative Analyst Office, said he believes California will have the money to pay for these programs in the future because the consensus among economists is “the economy is supposed to grow at its fastest clip in the past 40 years.”
But Petek said state revenues could stall if inflation increases too much.
Republican state Sen. Brian Dahle said he worries about inflation, noting the federal government has pumped trillions of dollars into the economy over the past year in various forms because of the coronavirus.
“If it cost you twice as much to get done what you are trying to do because of inflation, it really is going to impact the outcomes of our budget,” he said.
