Stabilizing pending a priority
Gov. Gavin Newsom has released a May Revision proposal for the 2024-25 fiscal year that ensures the budget is balanced over the next two fiscal years by tightening the state’s belt and stabilizing spending following the tumultuous COVID-19 pandemic, all while preserving key ongoing investments.
Under the Governor’s proposal, the state is projected to achieve a positive operating reserve balance not only in this budget year but also in the next. This “budget year, plus one” proposal is designed to bring longer-term stability to state finances without delay and create an operating surplus in the 2025-26 budget year.
In the years leading up to this May Revision, the Newsom Administration recognized the threats of an uncertain stock market and federal tax deadline delays – setting aside $38 billion in reserves that could be utilized for shortfalls. That has put California in a strong position to maintain fiscal stability.
“Even when revenues were booming, we were preparing for possible downturns by investing in reserves and paying down debts – that’s put us in a position to close budget gaps while protecting core services that Californians depend on. Without raising taxes on Californians, we’re delivering a balanced budget over two years that continues the progress we’ve fought so hard to achieve, from getting folks off the streets to addressing the climate crisis to keeping our communities safe.”
Governor Gavin Newsom
Below are the key takeaways from Governor Newsom's proposed budget:
Newsom wants to solve two years of budget problems in a single budget, tightening the state’s belt to get the budget back to normal after the tumultuous years of the COVID-19 pandemic. By addressing the shortfall for this budget year — and next year — the Governor is eliminating the 2024-25 deficit and eliminating a projected deficit for the 2025-26 budget year that is $27.6 billion (after taking an early budget action) and $28.4 billion respectively.
The revised–and balanced–state budget cuts one-time spending by $19.1 billion and ongoing spending by $13.7 billion through 2025-26. This includes a nearly 8% cut to state operations and a targeted elimination of 10,000 unfilled state positions, improving government efficiency and reducing non-essential spending — without raising taxes on individuals or proposing state worker furloughs. The budget makes the California government more efficient, leaner, and modern — saving costs by streamlining procurement, cutting bureaucratic red tape, and reducing redundancies.
The budget maintains service levels for many key housing, food, health care, and other assistance programs that Californians rely on while addressing the deficit by pausing the expansion of certain programs and decreasing numerous recent one-time and ongoing investments.
Newsom proposes balancing the budget by getting state spending under control — cutting costs, not proposing new taxes on hardworking Californians and small businesses — and reducing the reliance on the state’s “Rainy Day” reserves this year.
CALIFORNIA’S ECONOMY REMAINS STRONG: The Governor’s revised balanced budget sets the state up for continued economic success. California’s economy remains the 5th largest economy in the world and for the first time in years, the state’s population is increasing and tourism spending recently experienced a record high. California is #1 in the nation for new business starts, #1 for access to venture capital funding, and the #1 state for manufacturing, high-tech, and agriculture.
