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The Legislature returned to Sacramento this week and will start to review Gov. Gavin Newsom’s budget when he introduces it next week. It won’t be pretty.
It will contrast to last year when legislators and Newsom had an estimated $100 billion surplus to play with—largely due to federal Covid-related money pouring in coupled with a very good year for initial public offerings that resulted in plenty of capital gains coming from the tech industry.
Not so in 2023. Sacramento adopted a budget without significant data after the IRS postponed the deadline for filing income taxes from April 15 to Oct. 15 because of storm damage from the atmospheric rivers that hit California and then, inexplicably at the last minute, extended it another month. Nobody is going to pay the IRS early when they can continue earning interest on their money so it was November before the state was seeing real revenue numbers.
They were ugly against the budget projections, income tax was off 23%. So, here we sit, six months into the fiscal year operating on a budget with no basis in reality. We’ve seen San Francisco falling well short of its budget and Mayor London Breed taking action to cut spending. No such actions from the Newsom administration.
The non-partisan Legislative Analyst Office projects deficits of $23 billion in the current fiscal year and then $68 billion for 24-25.
That includes the latest example of the Democrat’s pandering to illegal immigrants. Previously, they had extended MediCal coverage to immigrants who were seniors and to people 25 and under. The new budget eliminates that gap and covers all illegal immigrants. The cost—what seemed like pocket change with a $100 billion surplus– $3.1 billion that is ongoing.
The question this time around is how much can be papered over by borrowing or other budget gimmicks or how many real cuts must be made. School districts, between state budget guarantees and fed money, have had cash gushers. Those will go away. You’ve seen fractious budget negotiations in Dublin and Pleasanton as teachers’ unions have pushed for every dollar they can. District officials, wary of the state budget situation, have been holding the line.
No easy solution to please both sides particularly with Pleasanton having lost 700 students over the last few years. Declining enrollment, from a financial standpoint, is awful. The state pays its per-student allocation based on the prior year. So districts are a year behind on attendance versus revenue, a situation that requires tough decisions, particularly with a March 15 deadline to notify teachers of potential layoffs.
Sadly, local districts will have no real knowledge about the budget because the governor will submit at May revise at which point negotiations with the Legislature will get serious because it has a June 15 deadline to submit the budget to the governor. He must sign it by July 1.
Nothing will be easy in Sacramento or local agencies for the next several months.
Editor's note: "Tim Talk" is a blog written by Tim Hunt, a native of Alameda County. Hunt spent 39 years in the daily newspaper business and wrote a column for more than 25 years in addition to writing editorials for more than 15 years.
