SACRAMENTO, Calif. (AP) — The California Senate’s plan to make up the state’s estimated $54.3 billion budget deficit rejects Gov. Gavin Newsom’s proposed cuts to public education and health care programs — and instead takes more money from reserves and delays billions of dollars in payments to school districts.
Newsom’s plan would impose billions of dollars in permanent cuts to K-12 public schools and community colleges if the federal government does not send the state more money to help weather the economic downturn caused by the coronavirus. School districts have said the cuts would prompt massive layoffs, school closures and delay fall reopenings.
The Senate’s plan, unveiled late Wednesday, rejects those cuts. Instead, lawmakers would delay about $9 billion in payments to public schools for one year. That means school districts could go ahead and spend the money by borrowing or tapping their savings accounts and the state would reimburse them later.
The state has delayed payments to school districts during past recessions, but never this much at once. Former Gov. Jerry Brown delayed $10 billion in public education payments over several years before paying it all back. The Senate’s plan would defer almost all of that in just one year.
“It’s scary,” said Kevin Gordon, a lobbyist who represents many of the state’s public school districts. “But I think the consequences of these very deep cuts to schools are scarier.”
It’s unclear how the Legislature would pay the districts back next year, when the state could have an even worse budget deficit. The nonpartisan Legislative Analyst’s Office predicts the state will have budget deficits through at least 2024 because of the economic fallout from the coronavirus pandemic.
“The word ‘deferrals’ is a euphemism for ‘accounting trickery,’” said Jon Coupal, president of the fiscally conservative Howard Jarvis Taxpayers Association. “It’s the kind of accounting that puts private sector corporate employees in jail. I don’t think it’s good policy.”
Education funding is one of many contentious issues that Newsom, a Democrat, and Democratic-controlled state Legislature must negotiate as they head toward a June 15 deadline to pass an operating budget for the fiscal year that begins July 1. The Senate Budget and Fiscal Review Committee is scheduled to vote on its proposal Thursday. The state Assembly has yet to reveal its plan.
In January, California was expecting a multi-billion-dollar budget surplus as the state boasted a record 10 consecutive years of job growth in the nation’s most populous state. All of that changed in March when the new coronavirus hobbled the nation’s economy and sent California’s tax collections plummeting.
Now state officials are trying to find billions of dollars in cuts to make up for the lost revenue.
Adding to the financial woes, more than 5 million Californians have filed for unemployment benefits and are signing up for government-funded health insurance and other assistance programs — adding billions of dollars in new expenses to the state’s budget.
Newsom has pleaded with the federal government to send the state billions of dollars in additional aid to prevent the most painful cuts to state services.
His plan would cancel $15 billion in budget cuts, mostly to public education and health care programs, if Congress approves additional aid by July 1.
The Senate’s plan would also avoid budget cuts if Congress approves new spending. But their plan gives Congress more time to act. The Senate’s cuts would not take effect until Oct. 1 if the federal money doesn’t arrive.
“There is growing confidence that the federal government will act and the trigger solutions contained in the Senate Version will not be implemented,” according to a memo from the Senate Budget and Fiscal Review Committee.
Aside from public education, the biggest difference between Newsom’s plan and the state Senate’s proposal is health care spending.
Newsom withdrew a proposal that would have given government-funded health insurance to low-income adults 65 and older who are living in the country illegally. The Senate restores that plan but delays it until 2022.
Under Newsom’s plan, fewer older adults would be eligible for Medicaid, the joint state and federal health insurance program for the poor and disabled. And he would eliminate $119 million in spending that keeps more than 45,000 older adults out of nursing homes.
The Senate plan restores all of that spending, plus optional Medicaid benefits that include dental and vision.
To pay for all this, the Senate plan would increase a tax on the companies that manage the state’s Medicaid program to generate an extra $1 billion. But that would only happen if Congress does not approve additional aid for the state.