After submitting his revised budget to the Legislature, Gov. Gavin Newsom met with Senate Budget Chair Holly Mitchell and other leaders of the state Senate and Assembly. (photo by Clarissa Resultan, California Department of Corrections and Rehabilitation)

On May 14, in the face of a global health crisis that has triggered a global financial crisis, Gov. Gavin Newsom submitted his 2020-21 May revision budget proposal to the Legislature – a balanced plan to close a budget gap of more than $54 billion brought on swiftly by the COVID-19 recession.

“COVID-19 has caused California and economies across the country to confront a steep and unprecedented economic crisis – facing massive job losses and revenue shortfalls,” Newsom said. “Our budget today reflects that emergency. We are proposing a budget to fund our most essential priorities – public health, public safety and public education – and to support workers and small businesses as we restart our economy. But difficult decisions lie ahead. With shared sacrifice and the resilient spirit that makes California great, I am confident we will emerge stronger from this crisis in the years ahead.”

The May revision proposes to remove initiatives in the governor’s original budget, cancel and reduce spending included in the 2019 Budget Act, draw down reserves, borrow from special funds, temporarily increase revenues and make government more efficient. Due to the size of the challenge, there is no responsible way to avoid reductions. The budget will show that the most painful cuts will only be triggered if the federal government does not pass an aid package that helps states and local governments.

The proposal responds to the dramatic economic and revenue changes since the balanced budget plan proposed in January included a $5.6 billion surplus and record reserve levels. The rapid onset of the COVID-19 recession in California has resulted in more than 4 million unemployment claims being filed since mid-March – the unemployment rate is now projected to be 18% for the year – and there is a $41 billion drop in revenues compared to January’s forecast. With a higher demand for social safety net services increasing state costs, the $54.3 billion deficit is more than three times the size of the record $16 billion set aside in the state’s Rainy Day Fund.

This recession-induced swing of nearly $60 billion in just four months underscores the necessity of additional federal funds to protect public health and safety, public education and other core government functions, as well as to support a safe and swift economic recovery. If additional federal funds are not forthcoming, the May revision spells out spending cuts necessary to meet the constitutional requirement for a balanced state budget.

For information, visit ebudget.ca.gov.