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Newsom previews balanced January budget, urges Prop. 2 and Prop. 4 reform and notes pension payments
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Summary
Gov. Gavin Newsom previewed a balanced January budget that includes expanded reserves and proposed reforms to ballot measures that limit the state's ability to set aside funds. He cited recent payments toward pension and healthcare liabilities and reiterated an intent to negotiate on unemployment insurance debt.
TURLOCK — Gov. Gavin Newsom used a visit to Stanislaus State on Monday to preview the administration’s January budget, highlight fiscal reserves and call for changes to voter-approved limits on setting aside surplus revenue.
Newsom said the January budget will be balanced and include about $17,000,000,000 in reserves, with an additional $1,000,000,000 in discretionary reserves. “It needs to at least be doubled to 20%,” he said of Proposition 2’s reserve cap, proposing a higher savings target to soften revenue volatility.
Why it matters: The governor framed the revisions as a way to stabilize California’s finances against the state’s volatile revenue base, which relies heavily on capital gains. He said the administration would seek political support to exempt reserve contributions from the spending limits imposed by Proposition 4.
Details and liabilities: Newsom highlighted recent and planned actions to reduce long-term liabilities: he said the state has paid down roughly $14,000,000,000 toward unfunded health-care and pension obligations and has a commitment to pay about $10,000,000,000 more over the next four years, including $2,400,000,000 in the current budget year.
Unemployment insurance debt: Reporters asked about the state’s unpaid unemployment insurance (UI) debt originating from the pandemic. Newsom described the UI shortfall as an impact “of the pandemic” and said the administration previously sought a $1,000,000,000 payment toward that liability but was unsuccessful in earlier negotiations with the Legislature. He said the issue remained under negotiation ahead of the May revise.
Budget timeline and risks: Newsom cautioned that the January budget is a snapshot subject to change before the May revise and said federal policy or international events could change revenue projections. He also said the administration identifies a multi-billion-dollar posture to provide flexibility if federal assistance is delayed.
Next steps: The administration plans to submit the budget in January and continue talks with legislative leaders on reserve reforms and options for addressing the UI debt.
