Behind Newsom's $301 billion budget, big financial concerns (2024)

In summary

California has a whopping $100 billion surplus, but looming financial threats could threaten the state’s economy in just a few years.

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Gov. Gavin Newsom and state lawmakers have less than a month to reach an agreement on how they should spend $300.7 billion — an exercise in compromise every bit as existential as it is financial.

The record-breaking updated budget proposal Newsom unveiled Friday was buoyed by a staggering $97.5 billion surplus, a sum larger than the operating budgets of most states and significantly higher than the $76 billion windfall the governor’s administration had predicted in January.

• For a comprehensive breakdown of what the governor’s blueprint means for housing, education, health care, criminal justice, the environment and other key issues, check out this story from Ben Christopher and the CalMatters team.
• State lawmakers, who have their own budget priorities, now have until June 15 to send a balanced plan to Newsom’s desk for the fiscal year that begins July 1.
• Newsom: “While gridlock persists in Congress and right-wing fanatics turn statehouses across the country into laboratories of hate and oppression, here in California, we’re putting in the work to grow our economy and implement real, inclusive policy change to create a brighter future for all.”

But behind the governor’s optimism lurks concerns that California’s unprecedented prosperity could soon give way to a grimmer economic picture — one that would only worsen the gap between wealthy and poor residents upon which the state’s budget depends.

• Threat #1: Volatile capital gains. Newsom and legislative staff noted that taxes on capital gains — investment earnings from the state’s wealthiest residents — made up the highest percentage of personal income taxes collected by the state since 1999, right before the dot-com bust that cratered the economy and set off a decade of budget deficits.
• Threat #2: A whole host of external factors, including “persistent global supply chain bottlenecks, international economic sanctions in response to the Russian invasion of Ukraine, tighter monetary policy and persistently high inflation,” as a Senate budget analysis put it. (The analysis also noted that California could see accelerated economic recovery if those conditions improve.)
• Threat #3: An obscure voter-approved constitutional amendment that blocks the state from spending more tax dollars per person than it did in 1978, once adjusted for inflation. That amendment is a big reason why the state will likely face challenges balancing its budget in the next few years, according to the nonpartisan Legislative Analyst’s Office. There is growing momentum in Sacramento to modify the rule via a 2024 ballot measure, and Newsom on Friday also floated the idea of asking voters to expand the size of California’s “rainy day fund” — which could allow large growth in long-term government spending, the Los Angeles Times reports.

The proposed budget also illuminates persistent disagreement between Newsom and Democratic legislative leaders on the best way to keep vulnerable Californians out of poverty, CalMatters’ Alejandro Lazo reports.

As part of his $18.1 billion inflation relief package, Newsom wants to send as much as $800 to every eligible registered vehicle owner in the state to offset the soaring price of gas, which in California reached a record per-gallon high of $5.96 on Sunday.

• But top Democrats say their proposal to send $200 checks to individuals earning less than $125,000 and to each taxpayer and child in households earning less than $250,000 ensures the state’s neediest residents will benefit most.
• Senate President Pro Tem Toni Atkins of San Diego: “The Senate is working to make sure Californians get rebates — not just passing along a one-size-fits-all windfall that benefits millionaires.”

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Other stories you should know

1. Weekend shootings stun SoCal

Southern California was rocked by a pair of shootings over the weekend that will likely supercharge the state’s ongoing debate over the most effective approach to tamping down gun violence. On Sunday, a gunman opened fire at a Taiwanese church congregation in Laguna Woods — an Orange County community predominantly comprised of residents at least 65 years old — killing one person and wounding five others before churchgoers “hog-tied” his leg and snatched two of his weapons, Orange County Sheriff’s Department officials said. Authorities said the suspect was a 68-year-old Asian man.

• Undersheriff Jeff Hallock: “That group of churchgoers displayed what we believe is exceptional heroism and bravery. … It’s safe to say that had they not intervened this situation could have been much worse.”
• And on Saturday, a gunman fatally shot a man outside Los Angeles’ popular Grand Central Market in broad daylight amid a bustling crowd of food hall customers.
• Assemblymember Miguel Santiago, a Los Angeles Democrat: “While we are still learning more about the (Laguna Woods and Grand Central Market) shootings, one thing is certain. It is that we need stricter gun laws and we need them now.”

Also Saturday, an 18-year-old opened fire at a Buffalo, New York, supermarket, killing 10 and wounding three in what authorities suspect was a hate crime against Black people.

• The killings come about a month after Sacramento endured its most fatal gang shootout in history; two months after a man killed his three daughters, a chaperone and himself at a Sacramento church; and about a year after a gunman killed eight people and himself at a San Jose rail yard.

2. Yiu bets big on controller campaign

Yvonne Yiu really wants to be California’s next state controller. The Democratic Monterey Park council member has poured $5.7 million of her own money into her campaign — nearly as much as the $7 million raised by the four other major candidates in the race, combined. But Yiu’s campaign differs significantly from those of Republican Lanhee Chen and Democrats Malia Cohen, Ron Galperin and Steve Glazer, CalMatters’ Sameea Kamal reports: For one thing, it’s quieter. Yiu declined an in-person video interview for CalMatters’ Voter Guide, and doesn’t speak in her campaign ads, instead letting a narrator introduce her to voters. But will this “stealth” approach prove effective in what’s quickly becoming one of the hottest races in California’s June 7 primary election? Sameea takes a closer look.

Other election updates:

• The June 7 primary will be California’s first since 1964 without a single statewide ballot measure, the Los Angeles Times’ John Myers reports — though voters could see as many as 11 on the November ballot. They won’t, however, weigh in on an initiative to make it harder to raise state and local taxes — the latest proposal that failed to garner enough signatures ahead of last week’s submission deadline.
• Former President Donald Trump endorsed GOP Assemblymember Kevin Kiley of Rocklin’s congressional campaign, which could prove pivotal in the closely watched race to represent the safely red district stretching from Death Valley to the foothills northeast of Sacramento. Sacramento County Sheriff Scott Jones, Kiley’s main GOP opponent, called the endorsem*nt “certainly disappointing, and a bit surprising.”
• Ahead of a possible recall election, Los Angeles County District Attorney George Gascón walked back a controversial policy preventing prosecutors from seeking cash bail for defendants charged with nonviolent crimes, the Los Angeles Daily News reports. It’s at least the third time Gascón has backtracked on a signature directive amid rising voter concerns about crime.

3. Abortion rights advocates rally across state

Tens of thousands of Californians, including prominent officials, gathered in cities across the state on Saturday to protest a leaked U.S. Supreme Court draft majority opinion suggesting justices are poised to overturn the federal constitutional right to an abortion. The rallies — held in cities including Los Angeles, Long Beach, Riverside, San Francisco, Oakland, San Jose, San Diego, Sacramento and Santa Ana — were among hundreds organized across the country as part of Planned Parenthood’s “Bans off our Bodies” National Day of Action. In some cities, abortion rights supporters squared off with anti-abortion activists, though the conflicts appeared to largely be verbal rather than violent.

• Lt. Gov. Eleni Kounalakis, speaking at a rally in Santa Ana: “They are telling you this is about children. That’s not true. This is about power.”
• First Partner Jennifer Siebel Newsom, speaking at a march in Los Angeles and reiterating some of the points her husband made while unveiling his “pro-life” budget proposal: “You can’t say you’re pro-life if you turn your back on a child and their mother after the child is born. You can’t say you’re pro-life if you don’t invest in early childhood education. … You can’t say you’re pro-life if you don’t support commonsense gun laws.”
• Abortion rights advocates plan to keep the momentum going ahead of California’s June 7 primary election: Planned Parenthood Affiliates of California launched a statewide bus tour in Sacramento on Saturday that will conclude May 25 in Long Beach with an event co-hosted by the California Democratic Party.

In related news: If the nation’s highest court does overturn the constitutional right to an abortion, it may soon consider whether states have the power to block their residents from traveling to other states — such as California — for the procedure. And some legal experts say that ruling could partly depend on the court’s forthcoming opinion on a California law that requires pork sold in the state to come from pigs raised under certain conditions, USA Today reports.

CalMatters columnist Dan Walters: Newsom’s electric car nirvana is colliding with reality.

Alarming research on pesticide warrants curbs on its use: The human health risks of the dangerous pesticide imidacloprid have managed to fly largely under the regulatory radar in California — until now, writes Jonathan Evans of the Center for Biological Diversity.

Other things worth your time

At tech companies, the rebellion against the return to the office is getting serious. // Wall Street Journal

‘Everything was a battle’: S.F. homelessness nonprofit leader leaves Bay Area as cost of living soars. // San Francisco Chronicle

‘Democrats had better get their act together’: Efforts to combat inflation aren’t resonating with Latino voters. // San Francisco Chronicle

Gifted education has been shrinking in San Diego and California. // San Diego Union-Tribune

Opinion: California parents say no to anti-Semitic ethnic studies. // Wall Street Journal

L.A.’s teachers union seeks 20% salary increase over two years. // Daily News

California set to launch hundreds of community schools with $635 million in grants. // EdSource

Site near San Quention could go from guns to affordable homes, with support from state. // San Francisco Chronicle

Sacramento County considers limiting where homeless can camp. // Sacramento Bee

Is the Bay Area progressive? These key district attorney races will show how voters see crime and policing. // San Francisco Chronicle

Nancy Pelosi-aligned dark money nonprofit has been out of compliance in California for months, filings show. // Fox News

CSU treats sex harassment claims inconsistently. // Los Angeles Times

LAPD overlooked 3 dead children in home for 7 hours. // Los Angeles Times

Placer County CEO admits he was driver in Rocklin collision that fatally struck teenage boy. // Sacramento Bee

Four arrested in dozens of Northern California fires set over the weekend. // Los Angeles Times

California Airbnb guests get little warning of high fire risk. // Los Angeles Times

The biggest potential water disaster in the U.S. is in California. // New Yorker

Rice is Sacramento Valley’s gift to the world. Can it withstand California’s epic drought? // Sacramento Bee

California drought spells devastation for Pacific Flyway waterfowl. // Sacramento Bee

A wealthy L.A. enclave copes with water restrictions: What about my koi pond? // Los Angeles Times

17 states push EPA on California vehicle emission standards. // Los Angeles Times

$230 million settlement reached over 2015 California oil spill. // Associated Press

Exxon challenges California county’s denial of oil trucking permit. // Reuters

In a dramatic change, whales are now hanging around in San Francisco Bay. // San Francisco Chronicle

California launched a high-stakes plan to save its monarch butterflies. Scientists say it’s working. // San Francisco Chronicle

The Oakland Athletics are the loneliest team in baseball. // New York Times

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