The Assembly and Senate approved a $311.7 billion budget bill June 15 with no broad-based tax increases, but legislative leaders indicated that changes will be made to the plan after negotiations with Governor Gavin Newsom conclude and when more accurate revenue projections are available after October tax payments are received.
The budget bill (SB 101, Skinner) was approved with a 61-14 vote of the Assembly and a 32-8 vote of the Senate. The party-line votes occurred on the deadline for lawmakers to approve a budget bill or forfeit their pay.
The budget’s $311.7 billion in total spending (including $227 billion from the general fund) is higher than the $306.5 billion ($224 billion from the general fund) proposed by Newsom in May, and higher than last year’s $307.9 billion budget.
Senator Nancy Skinner, chair of the Senate Budget and Fiscal Review Committee, said the legislative budget includes no tax increases other than a managed care organization (MCO) tax extension proposed by the governor.
Senate President Pro Tem Toni Atkins’ outline of the budget agreement stated that the legislative budget has “no ongoing cuts to core programs” and maintains “planned program increases for schools, higher education, CalWORKs and SSI/SSP grants, Medi-Cal expansions, and more.”
“The Governor met his constitutional obligation by proposing a budget on January 10,” the Senate Democratic leadership’s budget outline stated. “And now the Legislature is poised to meet its constitutional obligation and pass a budget by June 15. Just as it is understandable for the Legislature to not agree with every detail of the January 10 proposal, there should be no expectation for the Governor to agree to every detail of the June 15 Legislature’s version. So, while both the Executive and Legislative branches of government are both meeting their constitutional obligations, more work will be done to craft the Final Version of the Budget Act of 2023.”
“I am confident that that agreement will be very close to what we are adopting today,” Skinner told her colleagues.
Major changes also could be made later in the year when officials have more concrete revenue projections. Revenue from the state’s largest source of funds – the personal income tax – typically arrives in April, but this year’s extension of the personal income tax filing deadline to October 16 created a large question mark in the budget.
Assembly Member Vince Fong, a Republican from Bakersfield, said the budget is “not complete … it is really only a framework … based on risky revenue estimates.”
“As revenues decrease, government spending continues to grow,” Fong added. “Only in California can a state take in less revenue yet spend billions more on government programs. … It is difficult to reconcile the concerns about managing a deficit when this legislative budget framework actually spends more than the governor’s budget proposal. Spending over $311 billion tells me this state indeed has a spending problem.”
Provisions of the legislative budget include:
- Approval of the governor’s film tax credit extension and refundability proposal, “with final language to be negotiated.”
- A rejection of Newsom’s managed care organization (MCO) tax proposal to spend additional revenue over eight to 10 years, instead spending that tax money immediately to increase reimbursement rates and “make other investments in primary care, specialty care, hospitals, clinics, community health workers, behavioral health capacity, reproductive health care, abortion access, [and] workforce development.” The legislative budget also uses MCO tax revenue to eliminate pending trigger reductions for continuous Medi-Cal coverage for children and to pay for “share-of-cost reform” for seniors in Medi-Cal, adopted in the 2022-23 budget.
- Approval of the governor’s proposal to build a state office complex that will include a new headquarters for the California Department of Tax and Fee Administration, but with funding from lease revenue bonds rather than the general fund. Newsom proposed spending $402 million in general fund money in 2023-24 to begin the design-build phase of the complex, which is projected to cost more than $1 billion when completed. The $1 billion office project is under way at the same time that a group of lawmakers is seeking to abolish the elected State Board of Equalization and transfer most of its responsibilities to the CDTFA, ostensibly to save money on office space. The Richards Boulevard Office Complex would be located just outside of downtown Sacramento, and would include approximately 1.25 million square feet, composed of four buildings ranging from seven to 11 stories, on land where the State Printing Plant once stood.
Assembly Speaker Anthony Rendon said one of the biggest sticking points in budget negotiations is Newsom’s proposal to make changes to the California Environmental Quality Act to streamline infrastructure construction, Capital Public Radio reported June 14.
Senator Brian Dahle, a Republican business owner and 2022 candidate for governor, said the budget does not do enough to improve the state’s business climate to keep jobs and tax revenue in California. For example, he said, rather than paying off the debt to the federal government for the unemployment insurance fund to avoid triggering employment tax increases, the budget simply borrows money internally to pay some of the interest on the debt.
“When we have no businesses left in California, your budgets are going to continue to be worse …,” Dahle said. “There’s not one thing in this budget that is going to help a California business stay in California.”