California governor aims to slash 10,000 vacant state jobs to help close $27.6 billion deficit

🌈 Abstract

The article discusses the $27.6 billion budget deficit announced by California Governor Gavin Newsom, and the proposed measures to address it, including eliminating 10,000 vacant state jobs, cutting spending across 260 state programs, and suspending the net operating loss tax deduction for businesses.

🙋 Q&A

[01] Budget Deficit and Proposed Measures

1. What is the size of California's budget deficit? California has a budget deficit of $27.6 billion, according to Governor Gavin Newsom.

2. What are the key proposed measures to address the deficit?

• Eliminating 10,000 vacant state jobs
• Cutting spending across 260 state programs
• One-time cuts of $2 billion for broadband, $272 million for employment services, and $500 million for water storage
• Continuing cuts of $81 million by closing housing units with 4,600 beds across 13 state prisons, and removing $300 million in pandemic-related help for state and local public health departments
• Cutting $510 million in ongoing spending for a scholarship program for middle class college students pursuing a teaching credential
• Suspending the widely used net operating loss tax deduction for businesses

3. How does the deficit compare to previous estimates? The $27.6 billion deficit is smaller than the $38 billion Newsom predicted in January, but that's because it doesn't include $17.3 billion in cuts and other actions he and lawmakers already agreed on to help close it. Otherwise, the deficit would be closer to $45 billion.

4. What are the reasons for the budget deficit? The deficit is due to a decline in state revenues, driven by increasing inflation and a slowdown in the state's technology industry. Through the end of April, state tax collections from personal income, corporations, and sales dropped more than $6 billion below the previous estimate.

[02] Reactions and Outlook

1. How have Democratic legislators responded to Newsom's budget proposal? Democratic legislators have applauded Newsom's effort to deal with multiple years of deficits and vowed to protect spending for social safety net funding and classrooms.

2. How have Republicans responded? Republicans, such as Assemblyman Vince Fong, have criticized Newsom for failing to responsibly manage the state's spending, calling the budget situation a "mess" and saying that budget gimmicks, cost shifts, and more borrowing only create more problems in the future.

3. What is the outlook for the state's budget going forward? Newsom and the non-partisan Legislative Analyst's Office have disagreed on the true size of the state's deficit this year, and the LAO's new estimate next week is likely to be larger. The state's budget situation is vulnerable to swings in the stock market, as a progressive tax system means the state gets the bulk of its tax collections from rich people.