Assembly Democrats’ $17B plan to cut California budget deficit breaks with Newsom. Here’s how

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California Assembly Democrats have their own early action plan to shave $17 billion from the state’s looming budget deficit — but their approach differs from the one supported by Senate leaders and Gov. Gavin Newsom in several ways.

Assembly Speaker Robert Rivas, D-Hollister, and his caucus met on Tuesday to discuss a proposal that would freeze spending on one-time budget items and reject suggested housing and homelessness cuts, according to a draft of the early action package obtained by The Sacramento Bee and first reported by Politico.

It is unclear exactly how much money the spending freeze would free up in the budget negotiation process. The frozen items are not part of the $17 billion in solutions, but rather a way to create some financial flexibility heading into the spring and summer.

The draft said it “was a key Assembly priority to preserve at least a few billion more dollars of budget-balancing options for June.”

“More options for balancing the budget means the Legislature has more authority in the process,” the draft said.

The rejected cuts to homelessness and housing totaling about $1.3 billion, and the draft suggests “deferring such discussions to June.”

The draft plan approves of the governor’s plan to use about half of the state’s reserves, “leaving more than $18 billion of reserves at the end of the 2024-25 fiscal year.”

“The state’s reserves and other budget flexibilities were intended to give policy makers time to make thoughtful decisions about balancing the budget, rather than being rushed into decisions,” the draft said. “This plan works as intended.”

The Bee has reached out to Newsom’s office and the Senate president pro tem for comment on the Assembly proposal.

Members are hoping to have a full Assembly vote on the plan by April 11, the draft said.

California is facing an estimated $38 billion to $73 billion budget deficit. Legislative leaders and Newsom want to take early action on the spending gap before they negotiate the state’s overall budget package for fiscal year 2024-25, which begins July 1, in time to hit their June 15 deadline.

Newsom during his January budget presentation suggested a series of early action items, including a hike to the managed care organization, or MCO, tax on health insurers they could use to help obtain an additional $1.5 billion in federal money to fund the state’s Medi-Cal program.

The Legislature approved the bill making that change on March 21, just before their week-long spring recess. Newsom signed it on March 25.

The Assembly plan sheds light on the confusing agreement touted by Rivas, Newsom and Senate President Pro Tem Mike McGuire, D-Healdsburg, on March 20. It said the leaders agreed to take $12 billion to $18 billion in early action on the budget, but it provided no details on how their plan.

McGuire on March 14 released a “Shrink the Shortfall” early action plan that was substantially similar to Newsom’s proposal. Now, the Assembly early action draft makes it clear that Rivas and his members were not in agreement with the pro tem and the governor.