California lawmakers take up budget in tense economic times

SACRAMENTO, Calif. (AP) - The California Legislature will meet Monday to pass a budget for these uncertain times, without knowing how much money they have to spend and without an agreement with Gov. Gavin Newsom, whose veto pen could force lawmakers to start over.

The result will be a speculative spending plan that leaves cash-strapped local governments and public school districts hanging as they await their fate in a budget that must somehow cover a deficit the governor’s office has estimated at $54.3 billion.

The nation’s most populous state - with an economy larger than most countries - is notorious for drawn-out budget battles that stretch deep into the fall. Voter-approved reforms sought to change that by, among other things, requiring lawmakers to pass a balanced budget by midnight on June 15 or lose their salaries.

Lawmakers in the Democratic-dominated Legislature will meet that deadline Monday. But without an agreement with Newsom, the budget they pass likely won’t be the one that becomes law. The first-term Democratic governor has the power to sign, veto or alter any proposal the Legislature sends him. The two sides plan to continue negotiating and pass an amended budget later this month.

At stake is $1 billion in additional funding for local governments - endorsed by the Legislature but not the governor - that have struggled to pay for safety net services as sales tax collections plummeted during a stay-at-home order in place since March to slow the spread of the coronavirus.

Without the money, counties could have to cut inpatient psychiatric services, youth substance abuse programs, public health services for fighting measles and HIV and responding to reports of abuse, said Graham Knauss, executive director of the California State Association of Counties.

“All of that is at risk at this very moment,” he said. “We would love to budget based on hope that this shortfall will be addressed, but we have to budget based on what is real.”

Meanwhile, school districts are anxiously watching to see if they will get an additional $8 billion that’s in the Legislature’s plan or brace for cuts as they face extra costs for pandemic-induced changes like staggered schedules and bus routes.

“Everybody in public education in this state is on pins and needles,” said Kevin Gordon, a lobbyist who represents many of the state’s public school districts.

Part of the problem is the Legislature’s budget process has been turned upside down. In a normal year, everyone has to pay their taxes by April 15. This year, because of the coronavirus, the state moved the deadline to July 15 - a full month after lawmakers are required to pass a spending plan, leaving revenues uncertain.

That encourages lawmakers to wait as long as possible before passing a budget “so you don’t have to increase taxes or make budget cuts right away and then find out later that they were not necessary,” said David Kline, a spokesman for the California Taxpayers Association.

Plus, the Legislature missed two months of work because of the coronavirus, watching as Newsom spent billions of dollars without their oversight and issued dozens of executive orders that changed laws without their approval.

“You have a Legislature that has been put on the sidelines because of COVID,” said Andrew Acosta, a Democratic political consultant. “All of that sort of combined makes it for a little bit of a toxic brew when it comes to the budget.”

Perhaps the biggest sticking point with the Legislature is how Newsom wants to spend money battling the coronavirus. The governor has requested $2.9 billion to spend as he pleases in the fall when the Legislature is not in session. And he wants authority to decide how to spend the more than $9 billion that Congress sent the state to aid in its coronavirus response.

“We feel very strongly that that is usurping the Legislature’s constitutional duty to oversee the appropriation of that money,” said Republican Assemblyman Jay Obernolte, vice chairman of the Assembly Budget Committee.

H.D. Palmer, a spokesman for the California Department of Finance, which prepares Newsom’s version of the budget, said negotiations are ongoing and “businesslike,” noting that the magnitude of the state’s financial situation will require difficult choices.

“You cannot confront a $54 billion shortfall any other way,” he said. “The question is how best do we do that in a way that maintains core services of state government and puts us on a path toward economic recovery.”