Gavin Newsom is counting on budget rookies to solve a $38B problem

SACRAMENTO, California — Gov. Gavin Newsom needs to solve one of the biggest challenges of his tenure.

He has three months to cleave $38 billion from the largest state budget in the country. And the final amount could be nearly double that.

But the governor has another problem: The lawmakers helping him have never done this before.

First-year leaders in the state Assembly and Senate have never even led state budget negotiations in good times, let alone addressed a shortfall of this magnitude. The inexperience during a sharp budget downturn extends to the entire class of lawmakers in Sacramento, some of whom were still in short pants during the Great Recession.

“This is going to be a new experience for almost everybody, including me,” said Jesse Gabriel, 42, the recently appointed Assembly Budget Committee chair.

California’s bleak budget picture has dominated debates in Sacramento, shadowing nearly every aspect of governing at the Capitol and forcing lawmakers to dramatically scale back their ambitions, if not publicly, then certainly in private. Embedded in many of those conversations is the lack of hands-on experience — forcing lawmakers to lean heavily on longtime aides while boning up on a complex subject that can take decades to master.

New Democratic leaders also have to unify their caucuses behind deep spending cuts — something hardly any members have had to vote for in the past — and each house has held policy retreats focused intensely on that goal.

For Gabriel, that has meant a “parade of meetings” and 170 budget request letters — some light reading for the Legislature’s spring recess this month.

The sheer scale of the turnover since the last downturn can’t be overstated. Each house’s Budget and Appropriations committees changed hands during a trying time. Senate Pro Tem Mike McGuire, 44, and Assembly Speaker Robert Rivas, 44 — who was sworn in over the summer — have both rewarded close allies with those powerful panels upon securing power.

Seemingly overnight, those jobs have changed from leading the sort of Oprah Winfrey-style giveaways worthy of campaign ads to playing a central role in cutting programs, moves sure to disappoint constituents.

“We don't have a lot of money to appropriate, so that's unfortunate,” acknowledged new Assembly Appropriations Chair Buffy Wicks, 46, a Rivas lieutenant.

They also don’t have a lot of time, a reality Newsom touched on with reporters after ducking out of a recent “quick check-in” with Assembly leaders.

“We’re hoping to move, and we made that clear in January,” Newsom said, “and we’ve only reinforced that since.”

Legislative leaders recently agreed with the governor to trim the deficit by at least $12 billion before final negotiations, but not on how they’ll do so.

The Assembly — where new leaders have promised to incorporate more of their caucus’ feedback than predecessors — haven’t yet publicized a proposal. But the Senate is pushing a detailed package of $17 billion in spending cuts, delays and borrowing with Newsom’s approval.

“We need to move decisively to shrink this shortfall early,” McGuire, who took over the chamber just last month, said in an interview. “But we all know tough decisions lie ahead.”

While McGuire kept several committee chairs in place, he did replace state Sen. Nancy Skinner, 69, as Budget chair — one of the few holdovers from the Great Recession — with housing and transit-focused Sen. Scott Wiener, 53, a rising star in the party. The Senate leader said he made the change because the two men share an “honest, open, blunt and transparent” style in approaching “tough budgeting.”

“We work hand in hand together. We’ve been in the trenches together, tackling some of the biggest issues facing the state and Legislature over these past many years,” McGuire said, calling Wiener both “pragmatic” and “relentless.”

Skinner remains on the panel with the title “chair emeritus” and is aiding with the transition.

Another shift has come in regional representation. Unlike during the Great Recession — and most years after — neither chamber leader is from the Los Angeles area. Though Gabriel is an Angeleno, Rivas represents the Central Coast and McGuire hails from the North Coast.

The change has added urgency to the budget advocacy efforts of Los Angeles Mayor Karen Bass, who recently traveled to Sacramento and lobbied against proposed cuts that could force her city to give back $11 million in housing grants to the state.

“This is the first time in many, many years that the leadership has not been from Southern California, so that's an additional reason why we needed to be here,” Bass, who was Assembly speaker from 2008 to 2010, told reporters last month.

Several lawmakers said they’re relying heavily on seasoned staff and more senior confidantes to advise them through this difficult time.

Gabriel has looked to Los Angeles County Supervisor Holly Mitchell, a former Senate Budget chair, and to Sacramento Mayor Darrell Steinberg — who led the state Senate during the Recession. Wicks has turned to several mentors, including Skinner.

Top budget consultants, including Jason Sisney in the Assembly and Chris Woods in the Senate, have worked on the budget since the Recession or longer. And at least five of the staffers hired during the Recession by then-Assembly Budget Chair Bob Blumenfield are still in the Legislature, he said.

“They know the tricks of budgeting,” said Blumenfield, now a Los Angeles City councilmember. “Not only Budget-101, but the advanced-level 504 class or whatever it would be. They’ve got their doctorates in creative budgeting.”

With term limits, which formally began in 1990, policymaking has become even more staff-driven in Sacramento. Budget negotiations often kick off with communication between staff in the Legislature, the governor’s office and the Department of Finance — making their institutional knowledge a key force in driving discussions forward.

There’s “always a lot of consternation” with leadership turnover, said former Department of Finance Director Keely Bosler. But many new leaders bring experience with local government financing and other useful know-how, she said, even if they're lacking state budget expertise.

Recent turnover has not been limited to the Legislature. Some key positions within the Newsom administration have also changed hands. Senate Budget veteran Joe Stephenshaw was appointed director of the Department of Finance in 2022, replacing Bosler, and before her, Ana Matosantos, a fixture among spreadsheet devotees.

“You have new people all around in this budget process,” said Assemblymember Phil Ting, the former Budget chair.

Fortunately for those new leaders, budget dealmaking has become easier in at least one respect since the Recession. In 2010, the large margin once needed to pass budgets was reduced to a simple majority — making interparty negotiations unnecessary for Democrats.

The largest estimate of the deficit, $73 billion, is a record in numerical terms. But the state’s fiscal problems aren't what they were when banks were collapsing and unemployment was skyrocketing more than a decade ago. Then, the state had no reserves, and the costs of its entitlement programs were swelling as people lost their jobs — prompting spending cuts that caused hardship for some of California’s most vulnerable.

Despite the structural deficit, California is still cash-rich because it hasn’t yet spent gobs of money collected in 2021 and 2022 that have been set aside for future spending on infrastructure improvements and other projects. The cushion of money already allowed Newsom to propose borrowing from state funds that are dedicated to specific programs — rather than endorsing deeper cuts.

It’s not like the Recession, when “people would testify that a choice would cause people to die,” said Blumenfield. “We were literally talking about how many colostomy bags people would be eligible for under Medicare.”