SACRAMENTO, Calif. (CN) — California’s governor and top Democratic lawmakers announced Saturday that they’d reached an agreement on the fiscal year 2024-25 budget.
The agreement calls for $297.9 billion in expenditures for the fiscal year, which starts July 1. It also bridges a $46.8 billion deficit through a series of cuts, fund shifts, delayed spending and pulling from reserves.
One component key to many legislators was $1 billion for the homeless housing assistance and prevention program, which Governor Gavin Newsom had cut from his budget. Lawmakers added it back and it is included in the agreement announced Saturday.
Part of the solution in reaching the agreement, and bridging the deficit gap, is the inclusion of a trigger to implement a $25 minimum wage for qualifying health care workers, as well as changes that will exempt state facilities.
“This agreement sets the state on a path for long-term fiscal stability — addressing the current shortfall and strengthening budget resilience down the road,” Newsom said in a statement. “We’re making sure to preserve programs that serve millions of Californians, including key funding for education, health care, expanded behavioral health services and combatting homelessness.”
Newsom and top Democrats touted the agreement for filling the 2024-25 budget hole, as well as an anticipated gap in 2025-26.
Additionally, the budget deal calls for a new law that would require California to put aside portions of expected surplus dollars, to be spent in a future budget. This would add more protection to state coffers, as lawmakers couldn’t designate future revenues for specific items until the money has been collected.
Lawmakers have been facing a massive budget deficit since late last year, when the state Legislative Analyst’s Office first revealed a deficit it later said reached as high as $73 billion. Newsom disagreed with that estimate, saying the shortfall was instead around $38 billion.
Regardless of which estimate was used, legislators knew cuts were coming.
Sixteen billion dollars of the total $46.8 billion deficit fix are cuts.
Those cuts include reducing state operations by 7.95% in the new fiscal year to almost all departments. Cuts in personnel, operating costs and contracting fees are expected to save $2.17 billion.
Another $1.5 billion in savings will come from reducing department budgets for vacant positions.
The Legislature had called for $1 billion in cuts from the California Department of Corrections and Rehabilitation. Lawmakers cited a growing budget for the department over the years despite having fewer prisoners. The budget agreement calls for a $750 million reduction.
“Thanks to hard work, tough decisions, and early actions, we’ve been able to shrink the shortfall, protect our progress, and maintain responsible reserves,” state Senate President Pro Tempore Mike McGuire said in a statement. “This balanced budget helps tackle some of our toughest challenges with resources to combat the homelessness crisis, investments in housing, and funding to fight wildfires and retail theft.”
The agreement calls for $115.3 billion in funding, with $82.6 billion of that from the general fund, for pre-kindergarten through 12th grade schools and community colleges — the minimum under Proposition 98, a constitutional amendment that requires an annual minimum funding level.
The budget agreement also keeps funding for expanding health care to all income-eligible state residents, regardless of their immigration status.
“The Assembly fought hard to protect the public services that matter most to Californians, and we are delivering a budget that prioritizes affordability and long-term stability,” Assembly Speaker Robert Rivas said in a statement. “We secured crucial investments to lower housing costs and keep people in their homes, and to sustain essential programs that help vulnerable families thrive.”
The Legislature had already met a June 15 deadline to pass a budget. However, it still needed to work with Newsom on an agreement for a final budget, which was achieved Saturday. Budget hearings in both legislative chambers are scheduled for this week.
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