May 13 (UPI) — Facing difficult choices, California Gov. Gavin Newsom has amended his proposed 2023-2024 budget to account for a larger-than-anticipated $32 billion revenue shortfall.
The projected deficit revealed Friday in the state’s “May Revision” outlook shot up from from an estimated $22.5 billion in January.
“As we prepare for more risk and uncertainties ahead, it’s critical that we keep the state on a solid fiscal footing to protect Californians and our progress in remaking the future of our state,” said Newsom.
According to the governor, part of the wider shortfall was caused by a tax filing delay for residents affected by storms, whose tax deadlines were moved from April to October.
“We tend to write checks we can’t meet and then we let people down,” he said.
Among the adjustments he announced, $3.3 billion will be moved out of the general fund and a new $2.5 billion tax will be imposed on managed care health plans.
State officials said they still do not expect a recession but nevertheless were concerned about elevated economic risks “that could significantly change the state’s fiscal trajectory in the near term.”
Taking that into account, the revised budget shows $37 billion in total reserves, including $22 billion in California’s Budget Stabilization Account.
Environmental groups, including Environment California and the Coalition for Clean Air, wrote a letter urging Newsom to cut energy industry subsidies and chastising him for eliminating $6 billion of investments allocated to combat the climate crisis.
“Ending subsidies for the oil and gas industry is consistent with the state’s climate goals and could provide an important alternative source of revenue to continue to ensure California leads the way in staving off the worst impacts of climate change,” they wrote.
Newsom has stated that he does not favor raising corporate taxes.
Rather, he emphasized the budget revisions will retain a $15 billion investment to tackle homelessness and continue to fund education to the tune of nearly $107 billion.
Additionally, the budget allocates $48 billion to address the effects of climate change.
“Our investments must match this reality of climate driven extremes,” Newsom said.