As a new legislative session gets underway in Sacramento next week, officials are sending mixed signals about the state of the state budget and just how ambitious California can afford to be in the coming year.
A mere week ago, the Legislature’s nonpartisan fiscal adviser released its annual outlook, projecting a small deficit that could soon grow into much larger deficits and warning that the state has no capacity for new spending commitments. Legislative leaders endorsed that message, urging restraint and a focus on protecting existing services.
But Gov. Gavin Newsom still has big, expensive ideas — especially as California gears up for another Trump administration in which the state may play captain of the resistance.
He announced on Monday that if President-elect Donald Trump follows through on plans to eliminate a federal tax credit for electric vehicles, Newsom will propose reviving an expired state rebate program. The governor previously floated creating a backup disaster relief fund in case Trump denies emergency aid to California and, unrelated to the president, doubling the state’s film and television production tax credit.
That’s potentially billions of dollars in additional spending — before we even get Newsom’s full budget pitch in January.
Funding for the electric vehicles rebate, at least, would come from California’s cap-and-trade program for large greenhouse gas emitters, a different pot of money than the general tax revenue stream that fiscal officials say is currently tapped out.
But any new programs, at a time when California is facing looming deficits, would likely have to be offset by cuts elsewhere to keep the state’s nearly $300 billion budget balanced.
While Newsom’s Department of Finance says he’s got a plan to keep everything in check — which he must share publicly by Jan. 10 — his solutions could come into conflict with the Legislature. Lawmakers, who must send Newsom a budget by June 15, will have their own priorities on which state programs to protect and, taking the governor’s lead, perhaps their own ideas for new spending.
Given that we’re months away from serious negotiations, let alone a budget deal, key players are still keeping their cards close to the vest.
Senate President Pro Tem Mike McGuire, a Healdsburg Democrat, told CalMatters in an interview Tuesday that his caucus “will review the multiple proposals that are being advanced” by Newsom, but he refused to say whether he is even open to creating new programs or expanding existing ones next year. Instead, he reiterated the careful and somewhat cryptic stance that he took last week.
- McGuire: “We need to be incredibly strategic on any new potential spending, and we need to err on the side of caution as we move forward into the budget negotiations.”