Newsom Nixes Climate Programs as Budget Bonanza Plunges to Deficit

In May, California was looking at a surplus of $100 billion. Then inflation and the threat of recession sunk the state into the red
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Gov. Gavin Newsom has been widely lauded for his leadership in combatting climate change, making moves that have included shifting California toward zero-emission vehicles. But after inflation sunk a massive budget surplus and the state is facing a projected $22.5 billion deficit in the upcoming fiscal year, Newsom announced on Tuesday that major climate change programs will be cut.

This deficit and the cuts it will bring are a far cry from the big-eyed bonanza that came after the projected budget, a bounteous near-$100 billion surplus for the current budget year, was announced in May.

“No other state in American history has ever experienced a surplus as large as this,” Newsom said at a May news conference, according to the Los Angeles Times. Back then, Newsom created a document full of ideas on how to use all the extra cash, including the expansion of medical care eligibility to all immigrants in 2024, paid family leave, free preschool for 4-year-olds, and a boost in the earned income tax credit. And there was, of course, the stimulus package to help Californians face pumps with sky-high gas prices.

California has seen a decade of healthy budgets that are often surpluses. But this year, all that extra money projected in the spring disappeared as inflation ballooned, a recession loomed, and interest rates inched upward. Mere months after the state’s historic surplus, a $25 million deficit was projected by the Legislative Analyst’s Office by November 2023, the L.A. Times reported.

Currently, Newsom’s $297-billion budget plan for 2023-24 juggles the money it will have in its coffers by “delaying multi-year investments and shifting funding to bonds to offset the shortfall;” Newsroom notes that he was careful not to touch what he’s long held as important: The state’s rainy day fund and other reserves; in total, California has $35.6 billion in reserves.

The climate cuts will move $4.3 billion in spending on zero-emission vehicles from the state’s taxpayer-funded general fund to a special fund, reports the AP;$3.1 billion in funding for climate and transportation will be delayed by a year.

“That makes us very mindful of the uncertainty of this next calendar year, and as a consequence of that we’re not touching the reserves, because we have a wait-and-see approach to this budget,” Newsom said, adding that he felt that California was in a better place than other states to survive a recession.

However, the governor and the legislature already committed to expensive new programs while in better times. His overall spending plan is just $10.9 billion under what was allocated in the current budget year. Newsom is set to release a revised budget in May.

Newsom said that California will continue spending in support of education, fighting climate change, and health care—including expanding Medi-Cal, homelessness, and growing the housing supply, while continuing with response to drought and wildfire.

“We’re keeping our promises,” he said.


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