California’s state budget is the product of a multi-month, multi-step process that involves the governor, the Legislature, lobbyists, interest groups and the public — with lots of debate, number-crunching and negotiation along the way.
This year, those deliberations are especially strained because the state is facing a budget deficit of at least $31.5 billion, a whiplash following two years of record budget surpluses.
CalMatters reporters are tracking those steps and conversations. Here’s what has happened so far — and what still lies ahead before the 2023-24 budget is final.
The governor is required by the state constitution to introduce a budget proposal by Jan. 10.
You can think of the January proposal as a rough draft. The budget relies on knowing how much money the state is going to have from federal funds, state taxes and other sources, but we don’t have as clear of a picture of its finances until income taxes are filed.
This January, for example, the governor’s office predicted a budget deficit of $22.5 billion. We know now that it’s larger. And this year, that picture is even less clear because the income tax filing deadline was extended from April to October for many Californians due to the devastating winter storms.
Still, Gov. Gavin Newsom’s January “rough draft” set the baseline for responses by the legislative budget committees, party caucuses in the Assembly and Senate and advocates and lobbyists for a multitude of interest groups. For instance, environmentalists quickly blasted proposed cuts to climate change programs.
Until the next deadline in May, the Democratic and Republican caucuses in each chamber of the Legislature respond to the governor’s proposal with their own ideas for how to slice the budget pie — programs where they want to spend more, and priorities they don’t want cut. Assembly Democrats, for instance, championed $1 billion more for childcare providers.
Also, the nonpartisan Legislative Analyst’s Office weighs in with its analysis of the governor’s revenue estimates and spending proposals.
And while at this point the final revenue picture may still be fuzzy, conversations during this time are early indicators for how negotiations may proceed.
For example, this year, Senate Democrats proposed hiking corporate taxes by more than 2 percentage points and making other changes to avoid some of the cuts Newsom proposed. The governor quickly shut down any idea of a tax increase.
State law requires the governor to issue an updated budget proposal by May 14, by which time, income taxes are typically filed.
This year, Newsom unveiled that update — known as the “May revise” — on May 12, with a more dire budget outlook than January.
The state’s Department of Finance determined that the projected deficit had grown by $9 billion since January, bringing the total to about $31.5 billion. (The Legislative Analyst’s Office separately estimated the deficit at $34.5 billion, partly using different assumptions.)
In his May proposal, Newsom called for shifting an additional $3.3 billion in existing commitments out of the general fund than he had proposed in January, including paying for $1.1 billion in climate spending and $1.1 billion in college student housing projects with bonds, and pulling back another $1 billion in unused money from programs such as middle class tax refunds and utility bill support for low-income residents.
Before the Legislature reaches an agreement with the governor, the Assembly and Senate must decide what to present.
This is typically the stage, after the May revision, when the Legislature makes decisions on major programs such as education, corrections, and health and human services.
This budget was published June 11, representing agreement between the Democratic caucuses of both chambers, who can use their supermajorities to pass budgets without any Republican votes.
The Democrats’ $312 billion spending plan largely aligns with Newsom’s on avoiding major cuts to ongoing programs, increasing core funding for some, including schools, public universities, welfare payments and health coverage; and expanding some others, including $250 million more for flood protection
But the plan differs from Newsom in some significant respects, including by offering a temporary lifeline to struggling public transit agencies. Other areas also remain to be worked out. The nonpartisan Legislative Analyst’s Office highlights some key differences.
Following the deal between the Senate and Assembly, budget committees and subcommittees meet and discuss the spending plan. But those discussions mostly frame ongoing negotiations with the governor.
By midnight on June 15, the Legislature must approve the budget bills — otherwise, they don’t get paid. That happened on the morning of June 15 for the 2023-24 budget, despite Republican objections.
But the approved plan is far from final. Legislative leaders will continue to work out specifics in conversations with the governor, as well as through “budget trailer bills,” which are sometimes controversial follow-up bills that flesh out specifics.
By law, the Legislature must approve and the governor must sign a budget before July 1, the start of California’s fiscal year. Otherwise, the state can’t pay its expenses, such as salaries or some vendor payments.
Newsom and legislative leaders announced they had a deal on June 26, the night before the deadline for the governor to sign, veto or line-item veto the budget bill passed by the Legislature. He signed that bill on June 27, then a main bill amending the Legislature’s budget on June 30. Lawmakers also passed more than 20 related bills on June 27. Newsom signed the budget bills, plus the infrastructure package, on July 10.
This year, Sept. 14 is the deadline for the Legislature to pass any bills. That means any leftover budget trailer bills — follow-up bills that flesh out specific programs in the main budget — must be approved by that date. Amendments to the budget are in bills referred to as “budget bill juniors,” which can also include trailer bills. Critics say that too many major policies are determined in these trailer bills, without sufficient review.
Newsom has a month, until Oct. 14, to sign or veto bills. But adjustments to the budget could still be made well into 2024.