Coronavirus Complicates The Budget Picture For California Lawmakers

There are a lot of uncertainties over the coronavirus, but for California lawmakers, one thing remains the same: Their constitutional mandate to pass a budget by June 15. 

Asm. Phil Ting, D-San Francisco, said lawmakers will “absolutely” meet that deadline, though the budget will likely look “very different” than the $222 billion proposal Gov. Gavin Newsom laid out in January. Ting chairs the Assembly’s budget committee. 

While the governor proposed new funding for health care affordability and resources for people experiencing homelessness, Ting is looking at passing something smaller. He predicts only a few areas will see extra money this year: “coronavirus [aid], possibly homelessness, maybe wildfires, but I think really, that’s about it.”

“Many of the governor’s proposals that we were all very excited about in January are probably going to be put on the backburner,” he said.

The San Francisco Democrat says the budgeting process will also continue into late summer, beyond when the initial scaled-down budget is passed.

That’s because state and federal tax deadlines have been postponed until July 15, so the state won’t have a clear picture of its revenues until late summer. That means the usual May revision period, when the governor typically presents an updated picture of the budget proposal, will be postponed. 

“We really won’t be able to do a May revise. We’re going to have to be doing an August revision of sorts,” Ting said. 

Lawmakers are currently working in their districts during an extended recess called amid concerns about the virus. While the Senate approved rules to pave the way for remote voting before the recess, Ting said the Assembly didn’t — they don’t believe they’re constitutionally allowed to. 

“Based on our reading of the Constitution, we all believe we have to be in Sacramento, we have to be present and physically there” to vote, he said. 

Is California Prepared for a Recession?

While experts say the coronavirus has put the country on the path to a recession, Newsom insists California can weather an economic downturn with close to $20 billion in rainy day reserves. 

“We’ve never been in a better position to weather a recession. Period,” he said at a press conference last week. 

Still, the state is likely to see a significant revenue drop because of slowed economic activity. 

Because California’s income tax structure relies more heavily on wealthy earners, the state budget is tied to what happens in the stock market, says Chris Hoene, executive director of the California Budget and Policy Center.  

“We see very rapid rise in the state’s revenues during periods of economic growth, like we’ve been in for nearly a decade now,” Hoene said. “But we also see those revenues dry up pretty quickly when the stock market declines like it’s done in the last few weeks.”

One small wrinkle, Hoene says, is that the state collects capital gains taxes on money withdrawn from the stock market. 

“So before we see an actual decline, we may see a temporary uptick in revenues on the income tax side as some investors started to windraw, but then we’ll see a rapid decline,” he said.

California lawmakers are also considering a stimulus package of their own — separate from the $2 trillion federal package signed by President Trump Friday.

“We’re looking to see where we can be the most helpful and also complement what they did,” Asm. Ting said, though he noted state lawmakers have “fewer levers” than the federal government. 

He said any state aid package — in addition to the $1.1 billion in emergency funds already approved to help combat the virus — would likely be crafted to target workers who have lost jobs or had hours cut, as well as small businesses.