How will Newsom and the Legislature Avoid Painful Cuts in California’s Budget?

From CalMatters politics reporter Alexei Koseff:

??For months, Gov. Gavin Newsom and legislative leaders have been projecting optimism in the face of a grim budget picture.

At a press conference in January where he unveiled his plan to deal with a projected $22.5 billion deficit next year, Newsom assured Californians: “We are keeping our promises.”

Top Democrats in the state Senate sent a similar message on Wednesday with the release of a document highlighting their “key values” heading into budget negotiations later this spring. It runs through a long list — more than 40 items! — of past accomplishments that they aim to shield from cuts, though it does not get into the specifics of a spending plan.

• Senate President Pro Tem Toni Atkins, a San Diego Democrat, in a statement: “California’s economic outlook remains solid, despite a reduction in the previously forecasted surplus. We are entering this year in a position of strength, but we also know that individuals and families are bearing the brunt of inflation. That’s why it’s important that we protect the progress we have already made.”

Californians, on the other hand, aren’t feeling too confident about where things are headed.

A new poll from the UC Berkeley Institute of Governmental Studies found that only 37% of respondents are confident that the governor and the Legislature will be able to balance the budget without making significant cuts to state programs and services. That includes 60% of Democrats, 28% of no party preference voters and just 5% of Republicans.

And 62%, including majorities across partisan lines, favored Newsom’s plan to scale back spending on climate change mitigation and electric car subsidies, which has been lambasted by environmental groups.

In contrast to the many programs that Senate Democrats want to safeguard, their budget values document did not identify any areas where they would be open to cuts. It did, however, suggest some alternatives for navigating the shortfall, which is projected to continue for the next few years. One option was to “explore common sense revenue options that protect the middle class and small businesses” — which sounds like a euphemism for a tax hike on high-income earners and large corporations.

Atkins’ office hosted a briefing on the document Wednesday, but it was off the record, despite objections from reporters, so we cannot share what was said.

In a follow-up email, attributed only to the Office of the Pro Tem, a spokesperson shared that “we will work to mitigate” a few of Newsom’s budget proposals targeting reductions in programs that are a priority for Senate Democrats, though the response did not address a question about what potential cuts might be on the table. As for raising taxes, they didn’t entirely rule it out:

• “In past downturns, budgets have included tax increases on the middle class. We are making clear that we will work to avoid increasing taxes on the middle class and small businesses.”

More time for taxes: Another complicating factor in Newsom and lawmakers putting together a budget by the mid-June deadline: Less certainty on the tax revenue picture because many Californians will file their returns later than usual.

Shortly after the series of deadly atmospheric rivers devastated wide swaths of California in late December and early January, the Internal Revenue Service extended the filing deadline from April 18 to May 15 for affected taxpayers.  Now, the IRS has announced it’s adding even more time — until Oct. 16 — for individuals and businesses in 45 of the state’s 58 counties. Here’s the list.

The governor’s office announced today that the state tax filing deadline will also be extended until Oct. 16 for affected counties.

“We’re going to have to make more projections and assumptions because the cash we could normally have in the bank in April, we’re not going to receive until mid-October,” H.D. Palmer, a spokesperson for the state Department of Finance, told KCRA.