California Governor Gavin Newsom announced that the state is grappling with an additional $12 billion budget deficit, pushing the total shortfall to $44.9 billion for the 2024-2025 fiscal year. The revised budget proposal reflects deeper spending cuts, a pause on key climate programs, and delayed funding for education and housing initiatives.

Key Highlights:

• Total deficit now stands at $44.9B, up from $37.9B projected in January.
• Newsom proposes spending reductions of over $30B.
• Several climate programs will be delayed or reduced.
• The budget maintains no new taxes, preserving previous fiscal promises.
• The state will draw $12.2B from reserves, leaving a $22.2B safety cushion.

Revised Budget Proposal Focuses on Cuts Over Revenue Increases

Deepening Deficit

Governor Gavin Newsom unveiled his revised budget plan on May 14, citing a downturn in capital gains and lower-than-expected tax revenues as the cause of an additional $12 billion shortfall. This adds to an already challenging $37.9 billion gap, now totaling $44.9 billion.

Budget Solutions

The proposed budget avoids new taxes and instead leans heavily on:

• Spending cuts totaling $30B+, especially across climate, transportation, and housing programs.
• Use of $12.2B from reserves, including the Rainy Day Fund.
• Delays or reductions in climate programs, such as decarbonization and clean transportation incentives.
• Education spending will be preserved, but new initiatives are postponed.

Political Outlook

Despite the cuts, Newsom positioned the budget as a “balanced and prudent approach”, citing the importance of maintaining financial resilience amid economic uncertainty. He emphasized that core services and K-14 educationfunding will be shielded from deep cuts.

Conclusion

California’s deepening budget woes are forcing the state into difficult decisions, with $12 billion in new shortfallspushing the total deficit to nearly $45 billion. Governor Newsom’s strategy focuses on spending cuts and reserve usage, aiming to protect essential services without increasing taxes. However, the deferral of major climate and housing programs raises questions about long-term impacts on state policy goals.