FRESNO, Calif. (KFSN) -- Governor Gavin Newsom's revised state budget proposal revealed a significant cut in spending to cope with a $54.3 billion shortfall and the millions of Californians left without work due to the coronavirus pandemic.
The $54.3 billion budget deficit is three times the size of the state's $16 billion "Rainy Day Fund" and has reduced California's projected revenue for 2020 by over 22%.
Newsom's administration projects unemployment will reach roughly 18% this budget year, with unemployment expected to peak at nearly 25%. The stay-at-home order issued on March 19 hit businesses hard and prompted 4.5 million people in the state to file for unemployment.
While Newsom has said that California is in a better place to handle this economic downturn than it has been in previous recessions, his budget focuses on the state's "core values."
Those values include public educations, public health and public safety.
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Newsom said the funding proposed for initiatives introduced in January will be reallocated, and many existing programs will face cuts, adding that the federal government can prevent the cuts from happening with proper funding.
The state also says it will be necessary to reduce pay to government employees. Negotiations will begin or continue with multiple state unions, with the goal of reducing pay by about 10%.
If an agreement can't be reached, the May Revision includes a provision to impose reductions.
The state added that nonessential state contracts, purchases and travel have been suspended, with a goal of reducing state operations over the next two years.
Gov. Newsom also discussed the shift to telework for state government, saying California will continue to examine business practices and deliver more government services online.
The May Revision also recommends 1.5% of state appropriation revenues be allocated to aid schools and pay for modifications that will allow campuses to reopen.
The public education sector will be given $4.4 billion of federal funding from the CARES Act for summer programs and to fill learning gaps for students.
Cal Grants and free tuition waivers for state community colleges will remain available to college students.
Gov. Newsom's May Revision also provides funding for people hit hard by the COVID-19 crisis, including families, children, seniors and people with disabilities.
The revision maintains the Earned Income Tax Credit, which aids families with annual incomes below $30,000, as well as other programs including prioritization of funding to Medi-Cal and Covered California for people who fall below the federal poverty line.
The governor's proposed budget would also include a $50 million increase to the small business loan program to help businesses that have fallen through the cracks of the federal aid package.
Public health and safety are also a priority for the revise, Gov. Newsom said, with the budget targeting $3.8 billion in federal money to protect public health and safety. The state is also proposing $1.3 billion to counties for public health, behavioral health and other programs, with $450 million proposed to cities to support the state's homeless.
The governor said the road to economic recovery is a multi-year responsibility and said the federal government has a "moral obligation" to help the states during this crisis to avoid catastrophic cuts. The revised budget will be reviewed by the state legislature.
Read the governor's full May budget revise here:
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Gov. Gavin Newsom reveals proposed revisions to California budget amid pandemic
The governor expects unemployment to peak at nearly 25%