California has a huge budget deficit. Newsom and lawmakers say they plan to make a plan


With a budget deficit of at least $38 billion hanging over their heads, Gov. Gavin Newsom and Democratic leaders of the state Senate and Assembly announced Wednesday an agreement to take action in April to begin dramatically reducing California's historic deficit.

The problem: Democrats in the state Capitol couldn't agree on an amount (they offered only a range of $12 billion to $18 billion) or explain what exactly they plan to cut.

Those details, the governor's office said, will be discussed and shared next month.

The surprise announcement of a plan to have a plan comes as pressure mounts on Democrats over the looming fiscal crisis.

Newsom has urged the Legislature to take “early action” to begin reducing the deficit now, well before the June deadline to pass a budget, by recouping unspent funds, delaying programs and reducing planned spending. The cuts currently under discussion are largely considered the easier options, hoping to free up Democrats to focus on tougher deliberations later this spring, when the full extent of the budget hole becomes clear.

The Senate unveiled its own plan last week to trim $17 billion from the deficit with early cuts, including delaying and withdrawing more than $1 billion to expand early education classrooms and support school facilities. But the Assembly, where Democrats hold 62 of 80 seats under a new speaker who has promised to give members more input on major decisions, has been slower to endorse a plan.

The struggle to reach a real consensus on the first cuts speaks to the challenge ahead as Democrats embark on a process to correct what could be the largest fiscal deficit state government has ever experienced. Some estimates suggest the deficit could be nearly double Newsom's estimates, forcing lawmakers to make tough decisions in May and June on programs that affect millions of Californians.

Democrats often pass an initial budget before the June 15 mandate required by state law and review it again before the fiscal plan takes effect on July 15.

“In some ways, I think this forces an earlier look at the reality of what they're going to have to vote on,” said Rob Stutzman, a veteran Republican Party strategist who worked for Gov. Arnold Schwarzenegger. “And they will be the total owners.”

While Republicans shared the pain during the budget crisis in the Schwarzenegger era, Democrats now control the governor's office and both chambers of the Legislature by wide margins.

Only a handful of lawmakers have experience in office during the previous budget crisis, and Newsom has never been forced to make cuts of this magnitude.

His call to reduce the deficit early has received mixed responses from the Legislature, prompting Newsom to come to Capitol Hill this week to meet with Senate Democrats and the Assembly leader in hopes of reaching a deal. before they leave Sacramento for spring break. Thursday. Lawmakers are expected to approve one of Newsom's major budget proposals before the recess, a tax increase on managed care organizations that would allow the state to draw down more federal funding for health care.

In a statement included in the deal announcement, California Senate President Pro Tem Mike McGuire (D-Healdsburg) said the Senate is ready to act quickly on difficult budget decisions.

“The deficit is serious and has increased by billions since January, which is why we must act quickly to reduce the deficit immediately,” McGuire said.

The Senate's plan to cut $17 billion, coupled with a desire to tap $12.2 billion in the emergency fund, could leave lawmakers with $29 billion less to make up in June.

Newsom's Finance Department has said the governor's administration supports the Senate package. But the Assembly has yet to detail how it wants to move forward.

House Budget Chairman Assemblyman Jesse Gabriel (D-Encino) held a news conference Friday and said the Assembly appreciated the governor and Senate's proposals but also needed more time.

“We value the process and we value the time to consider all of these trade-offs,” Gabriel said.

Gabriel said the Assembly planned to present its proposal in April. He said he could expect the Assembly to take early action, but he also saw advantages in waiting until June to have more certainty about the size of the deficit.

In a statement released Wednesday with the vague announcement of an upcoming deal, Assembly Speaker Robert Rivas (D-Hollister) hailed it as “an important first step” and said “the Assembly is committed to a budget process deliberative and transparent that protects hard-working Californians.”

But the announcement's lack of details about the cuts Democratic leaders are considering is an example of just the opposite, Sen. Roger W. Niello, R-Fair Oaks and vice chairman of the Senate Budget Committee, said in a statement. He called it “unilateral decision-making that occurs behind closed doors by a political party.”

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