Natalie Hanson

SACRAMENTO, Calif. (CN) — A $310.8 billion budget deal inched closer to becoming law in California on Wednesday, which lawmakers hope will tackle California’s nearly $32 billion revenue shortfall.

Assemblymember Phil Ting, a Democrat from San Francisco and chairman of the Assembly's budget committee, posted a now-deleted video on Twitter of Governor Gavin Newsom signing the placeholder on a Bay Area Rapid Transit train. That plan is now laid out in five trailer bills going through an expedited legislative process, expected to conclude during the coming week. The bills require a 2/3 vote from the Legislature, although they are already written into the signed placeholder, and will then head to the governor’s desk for final signature.

Lawmakers and Newsom reached an agreement this week on the second-largest state budget in history just days before the start of the fiscal year. By Tuesday night, the Legislature voted to approve the deal, and Newsom signed the legislative version of the 2023-2024 budget.

The budget summary is not yet live on the state's website, but Senate Bill 101 shows the total budget is $310.8 billion, with $226 billion in general fund spending. It leaves the state with a projected $37.8 billion in reserves — including $22 billion in the state’s Rainy Day Fund.

Newsom offered a slimmer budget proposal — $297 billion — this past January, projecting a revenue shortfall of $22.5 billion. By the time the governor handed the Legislature his revised proposal in May, that shortfall estimate had reached $31.5 billion. Last year’s budget was $308 billion on a $72.4 billion surplus.

Newsom blamed part of the shortfall on the federal debt ceiling crisis and an authorized filing delay for taxpayers affected by this winter's storms. About $42 billion is expected to be counted when income taxes finally come due in October.

The governor has faced pressure to address the statewide homelessness crisis and preserve funding to bail out the state’s public transportation systems. Transit agencies recently sounded the alarm that services would soon be cut as the steep ridership decline since the Covid-19 pandemic continued.

Monday's budget deal increases that fund to $5.1 billion. Funding for transit agencies includes $1.1 billion in new spending, rejecting some cuts in the governor’s May proposal. It establishes a Transit Transformation Task Force to ensure that agencies improve services and increase ridership.

Instead of raising income taxes, lawmakers agreed to impose a new tax on private managed care organizations that contract with the state to administer Medicaid benefits. The tax could generate about $32 billion over the next four years.

Newsom's frequent opponent, Republican Assembly caucus leader James Gallagher of Marysville, said in a statement Tuesday, "Our constituents pay some of the highest taxes in the nation, and for what?"

Gallagher said the budget does not contain efforts to speed up housing construction, or streamline wildfire prevention projects.

"Nothing to actually bring down costs — in fact, they're only going up," he said. "Californians are getting ripped off."

Other lawmakers signaled frustration during the budget process with the governor's proposed trailer bills, which enjoy an expedited process to move past typical regulatory votes.

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