California Leaders Say State Ready For 'Challenging Financial Future'

By Madison Hirneisen | The Center Square, The Center Square California

December 7, 2022

(The Center Square) – Though California lawmakers could be staring down a nearly $25 billion budget deficit next year, legislators are expressing confidence that a decade of preparation for a potential revenue shortfall will help the state navigate a future economic downturn without losing ground on key state programs.

That’s the main takeaway from a 2023-2024 budget blueprint unveiled by Assembly Budget Chair Phil Ting, D-San Francisco, on Wednesday, which outlines a possible framework for state spending in 2023-2024.

Ting’s budget blueprint touts California’s investments over the past decade in areas like education, homelessness and climate change. Over the last decade, California has earmarked $16.7 billion over three years for state housing and homelessness programs, increased per pupil spending to $22,000 and developed and expanded CalFire’s funding by 400% to increase the number of firefighters, according to the blueprint.

The blueprint also notes that the state currently has around $37 billion in budgeted reserves, which could serve as an important asset for the state after a recent projection by the nonpartisan Legislative Analyst’s Office forecasts a nearly $25 billion budget problem in 2023-2024. The LAO said the projected multi-billion-dollar deficit is “mainly attributable to lower revenue estimates,” which the state’s Department of Finance has reported in the first few months of this fiscal year.

With this projected budget deficit in mind, Ting’s blueprint outlines methods to balance the budget by re-evaluating the timing of one-time expenditures, shifting 2020-2023 expenditures to later years, using reserves to preserve core programs and temporarily shifting spending to special funds when possible. The framework also identifies several priorities to “protect progress” in 2023, including preservation of education funding, increased accountability for homelessness spending and continued oversight of multi-year climate investments.

In a statement on Wednesday, Ting expressed confidence that the upcoming 2023 budget can protect the state’s progress over the last 10 years by addressing the budget deficit while also prioritizing spending for key programs.

“We have spent a decade preparing for revenue shortfalls, and with the robust General Fund reserves and Rainy-Day Fund, California is prepared to weather future economic downturns while still prioritizing the gains that we have made in K-12 and early childhood education, our higher education institutions, homelessness support, and health care,” Ting said.

Ting’s blueprint offers the first glimpse of the conversations lawmakers will be having in the coming weeks involving state spending in the next fiscal year. During the first day of the 2023-2024 legislative session on Monday, Senate President Pro Tempore Toni Atkins acknowledged that the LAO forecasts shows a “challenging financial future,” but expressed optimism about the state’s position.

“In year’s past, the recent report from the Legislative Analyst’s Office would have kickstarted talks of painful cuts and middle-class tax increases. Not anymore,” Atkins said. “We have prepared for this moment, and thanks to a decade of responsible leadership and partnerships where we have made incredible progress while at the same time building historic reserves and paying down our debts, I am optimistic and even confident that we will protect our progress and protect working families from the burden of new taxes.”

Gov. Gavin Newsom is scheduled to announce his initial budget proposal in early January, which in recent years, has included historic investments in housing and homelessness, new spending for climate change initiatives and money for taxpayer refunds. Last month, the governor indicated that he plans to include a proposal in the January budget ensuring that the Biden administration’s student debt forgiveness program is exempted from state tax.

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