How Newsom solves California budget that went from a $97.5 billion surplus to $31.5 billion deficit

Gov. Gavin Newsom, who just a year ago was extolling an unprecedented $97.5 billion budget surplus, on Friday laid out his plan for closing a newly projected $31.5 billion deficit, with trims to climate programs, no bailouts for beleaguered mass transit systems and no new taxes.

California’s governor insisted that most of the shortfall — which has grown $9 billion since his first-draft plan in January and now amounts to about 10 percent of the $306.5 billion 2023-24 state budget — can be absorbed through accounting maneuvers that won’t require significant program or service cuts beyond those he previously proposed. He credited “prudent” budgeting that spent last year’s surplus revenue on one-time expenses, avoiding unsustainable, ongoing commitments.

“We don’t get ahead of our skis,” Newsom said. “This was not an easy budget. We try to do the best to hold the line, take care of the needy. You don’t have to be profligate to be progressive.”

The California Chamber of Commerce praised the governor for flatly refusing a state Senate proposal to cover the shortfall instead by raising taxes on large corporations.

“California businesses particularly appreciate the Governor’s comments emphasizing that tax increases are not the right thing to do and this is not the right time to consider them,” California Chamber of Commerce President Jennifer Barrera said.

Despite his fiscal legerdemain, Newsom also trimmed numerous programs he rolled out last year with fanfare. Among the largest: A plan to spend $54 billion over the next five years on climate change programs — including electric vehicle charging stations, rebates for electric cars and solar farms, forest thinning programs and others — was reduced to $48 billion.

Newsom administration officials noted that California still has the largest commitment of any state to reducing emissions that cause smog and heat the planet. The governor said Friday he will help push a new “climate bond” ballot measure through the Legislature this year for voters to consider next year.

Environmentalists argued he should increase taxes on the oil and gas industry instead.

“California is home to the dirtiest air in the nation, with transportation being our state’s leading source of climate- and health-harming air pollution,” said Chris Chavez, deputy policy director at the Coalition for Clean Air, based in Sacramento.

In an ominous sign for Bay Area transit agencies suffering from anemic post-pandemic ridership, Newsom declined to offer any bailout to BART, VTA and Caltrain. As federal COVID funding has begun to run out, the agencies, with the help of Sen. Scott Weiner, D-San Francisco, have asked Newsom to provide $5.1 billion to help avoid cuts in service.

“We’re just not in a position to solve for their short term needs at the moment,” Newsom said.

Despite the deficit, the budget included increases in some areas, including flood control. After damaging storms this winter ended California’s drought, filled reservoirs, and caused catastrophic flooding in southern Santa Cruz County and elsewhere, flood risk remains high in areas like the southern San Joaquin Valley and Tulare Basin between Fresno and Bakersfield as the massive Sierra Nevada snowpack melts.

The revised budget bumps flood control funding to $492 million, up from $290 million in the January budget proposal. Some of that new money will come from drought funding shifted to flood projects. It will aid farmers whose fields are underwater, bolster emergency response, and work to improve levees in the Delta and other flood-prone areas — although Newsom said local taxpayers in areas like Corcoran must do more to maintain their levees.