California Governor Gavin Newsom’s plan to fill a $22.5 billion deficit, the first for the state since 2018, mostly involves pulling back on promises he made when the state was flush, including paying with cash for projects instead of bonds.
(Bloomberg) — California Governor Gavin Newsom’s plan to fill a $22.5 billion deficit, the first for the state since 2018, mostly involves pulling back on promises he made when the state was flush, including paying with cash for projects instead of bonds.
“We were able to shift to cash a lot of the bonds,” Newsom said Tuesday in unveiling his $223.6 billion budget for the coming fiscal year. “We didn’t have to do it but it was a nice thing to do. It was a smart thing to do. It was wisdom.”
“Now, for no other reason than it provides flexibility and resilience for moments like this, we’re pulling back,” he said.
Read more: California Deficits Roar Back as Stock Rout Hits Taxes
Here’s how the governor intends to fill the gap:
- Newsom proposed delaying $7.4 billion of funding for certain programs that had been planned in the 2021-22 through 2023-24 fiscal years
- He wants another $5.7 billion in spending cuts and pullbacks, including inflation adjustments and a planned payment into the Unemployment Trust Fund
- He also shifts $4.3 billion of spending from the general fund to other funds, including having California State University sell bonds for capital projects instead of using state funds. The state will back the debt
- Newsom also proposed canceling his plan to reduce $1.7 billion in general obligation debt costs through the redemption of callable bonds
- He wants to scuttle a proposal to pay-as-you-go for some infrastructure projects that would have saved $2.1 billion in borrowing costs and instead issue lease revenue bonds
- The budget also withdraws a plan to deposit $4 billion into the state’s Budget Stabilization Account
Related: California, Flush With Surplus, Will Fund Projects With Cash
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