California leaders should be slashing fossil fuel subsidies instead of the climate budget

California is struggling (again) to balance its state budget. Forecasting a $31.5 billion deficit for the next fiscal year, Gov. Gavin Newsom proposed cutting $6 billion from the historic $54 billion climate budget approved last summer – and the state Legislature agrees on some $5 billion of those cuts.

As a new report from the World Bank pointed out, this makes little sense when the state wastes billions of dollars every year by failing to close tax loopholes or end subsidies for the fossil fuel industry.

Those illogical policies are especially absurd right now. Record profits are gushing into the largest oil and gas companies, and state lawmakers want to turn off the spigot for funds slated to mitigate the worst effects of climate change. It’s companies that contribute a disproportionate amount of global warming pollution – not California taxpayers – that should be paying for the mess they’ve created. 

As climate change-fueled extreme weather hammers California, the climate budget would give the state badly needed resources to invest in resilience measures. Cuts to these investments would present a serious danger to the public.

There’s a better option: cutting corporate welfare to major polluters. With that “found money,” California can maintain its commitment to programs that safeguard communities and transition us away from fossil fuels to an economy powered by clean energy.

The first step in eliminating oil and gas subsidies and tax loopholes is for Newsom to direct his administration to investigate the price tag on these fossil fuel handouts. The oil and gas industry reportedly benefits from six different tax benefits and subsidies, including offshore tax havens or mineral tax expenditures, but the public still doesn’t know the full extent.

More than 50 environmental, environmental justice and health groups have already signed a letter to the governor, demanding the elimination of these subsidies.

Chevron provides a representative case study. In 2022, it was the third-largest California-based company by revenue, after Apple and Google. For the year, Chevron posted a record profit of $35.5 billion – an amount so egregious it prompted Newsom to champion a price gouging penalty to limit excessive profits at the pump. Chevron had been operating with impunity, despite a 2015 U.S. Senate investigation that found the company hid $31 billion in profits among 13 offshore accounts to avoid paying more taxes.

Why keep subsidizing companies that eagerly game the system, increase household bills and dump pollution on Californians?

California should redirect that money toward building new renewable energy infrastructure and dealing with the antiquated, fossil fuel-based systems that get left behind, as well as the polluters’ unwillingness to clean up their own messes. A new study found that remediating California’s oil well sites will cost up to $21.5 billion, and warns that, under current rules, the public may be forced to pick up much of the tab.

If just one company made $35.5 billion in profits in one year, that kind of abdication of responsibility should not be allowed. 

By reimagining where the money will come from for the state budget, Newsom and the state Legislature have a golden opportunity to hold polluters accountable. They can eliminate subsidies and tax benefits with a bill that the governor can sign swiftly.

Budget cuts aren’t easy. But making the fossil fuel industry pay its fair share and, in turn, protecting California’s communities and climate, should be.