January 11, 2024
Governor Newsom presented his initial 2024-25 budget proposal yesterday, with less dire projections than had been anticipated. The $291 billion budget proposal is about 6% smaller than the total 2023-24 budget, and about 8% smaller than the General Fund spending approved in the 2023-24 budget act.
The budget deficit as calculated by the Department of Finance (DOF) is estimated at $37.9 billion for the coming fiscal year; this is about $30 billion lower than the Legislative Analyst projected last month.
Though the offices use different assumptions and have access to different information, Gov. Newsom stressed that over a six year period, the LAO and DOF projections are actually very close. The budget deficit is particularly large this year thanks to the unprecedented delay of the tax filing deadline last year. This forced lawmakers to finalize a budget for 2023-24 with much less information about state revenues.
The state budget has also been affected by the economic downturn with sharp drops in the stock market coming right after surging market growth that led to particularly large budget surpluses. With state reserves at all-time highs and prior year budget actions that anticipated the downturn and deficit, California is in a fairly strong position for these conditions.
The governor’s January proposal has measures including cuts, borrowing, funding delays and deferrals, and relies on state and Prop. 98 rainy day funds.
For public education – TK-12 and higher education – the budget proposals keeps funding fairly flat compared with the current year, and no dire cuts are proposed.
Below is a summary of the major items in the January budget proposal. In the coming weeks, as the details of policy proposals become available, we will circulate a more detailed report about the governor’s budget.
As a reminder, the budget process is a months-long one, and the 2024-25 budget
will not be finalized until June. In the next few months, legislative budget hearings will occur and the state senate and assembly will develop their own budget proposals.
In May, Governor Newsom will revise his proposal in advance of further negotiations with the legislature. With the large deficit, we will also be looking out for possible early budget actions.
For more information, please contact CFT Research Director Aimee Shreck.