Governor Newsom will soon unveil his updated 2023-24 California state budget proposal — commonly known as the May Revision or May Revise. This revised proposal will outline the governor’s economic and revenue outlook and his administration’s policy priorities, including changes since the administration’s January budget proposal. This year, we anticipate a decline in state revenues, which raises questions about our state’s reserves, additional revenue sources, and the governor’s priorities.
As we gear up to analyze the updated spending plan, our team is thinking about how the governor will adapt to the challenges and continue supporting the health and well-being of Californians.
How significant is California’s budget shortfall?
In January, the governor projected a $22.5 billion shortfall that the administration would solve through a series of trigger cuts, delays, and withdrawals or reductions of planned one-time spending.
Since then, revenue collections have been lagging behind projections, so the May Revision is expected to report a larger deficit.
Adding to the budget challenge, a large share of state income tax revenue is expected to arrive as late as October due to an extension by the IRS and Franchise Tax Board. This means the revenue forecast underlying the budget will be uncertain. If revenues ultimately come in significantly below the estimates, mid-fiscal year corrections to the budget may be necessary in early 2024.
Will the governor use our state’s budget reserves to avoid cuts to vital services?
Growing inequality and the rising cost of living undermine the ability of Californians with low incomes to stay housed, put food on the table, save for college, and generally make ends meet. And due to historical and ongoing discrimination, cuts to vital state services would disproportionately affect women, immigrants, and people of color.
The good news? State leaders have multiple options to close the budget shortfall in a way that protects core public services that help Californians meet their basic needs.
These options include cost shifts, tax increases to large and highly profitable corporations, internal borrowing, delaying one-time spending, and — if necessary — using a portion of the state’s robust budget reserves.
How will the May Revision help Californians?
The California Senate’s budget plan shows how policymakers can make a positive difference in the lives of Californians despite the state’s budget challenges. Bold investments that help Californians access health care, child care, and affordable housing require additional funding and should be taken seriously.
While the governor quickly dismissed the Senate’s proposal, we’ll soon learn how his administration covers the shortfall, avoids devastating cuts, and commits to helping Californians with low incomes.
More specifically, we are watching if the governor will…
- Keep his commitment to expand Medi-Cal to undocumented Californians ages 26 to 49 starting January 2024,
- Support needed investments for California’s early learning and care system,
- Support inclusive safety net policies,
- Enhance investments in multilingual students and multilingual education,
- Propose more robust, at-scale investments to continue addressing homelessness and increase the supply of affordable housing, and
- Commit to closing additional state prisons.
Will the governor seek other revenue options needed to create an equitable California?
California’s vast wealth should ensure that every resident has a roof over their head, access to food and clean drinking water, the opportunity to get a higher education, and a robust safety net to fall on when things get tough.
Yet, right now, that is not a reality. About 2 in 3 Californians with low incomes struggle to pay for basic needs like food and diapers. For Black, Latinx, and other Californians of color and immigrants, challenges making ends meet are often greater.
Meanwhile, many of the state’s largest corporations have experienced windfall profits and benefited from a combination of large federal tax cuts and state tax breaks.
Without increased revenues, policymakers will be unable to make progress for Californians, and inequality will continue to rise. The governor and other state leaders should consider how the state can equitably generate the revenue needed to make greater, ongoing investments in our communities.
What do you hope to see in Governor Newsom’s May Revision?
Each year, the Budget Center comes out with a First Look analysis of the governor’s May Revision that hopes to answer these questions and much more. Stay tuned!
