California lawmakers pass budget that ensures they get paid — but still need deal with Newsom

California lawmakers are still negotiating a final budget deal with Gov. Gavin Newsom, but they passed a placeholder budget bill Monday that ensures they continue to be paid in the meantime.

The California Constitution requires that lawmakers pass a budget by Tuesday or face pay suspensions. The Constitution doesn’t require Newsom to sign the budget yet, however, meaning lawmakers can continue negotiating with the Democratic governor ahead of the July 1 start of the fiscal year.

“The budget we are passing today represents a two-party deal between the Senate and the Assembly,” said Senate Budget Committee Chairwoman Nancy Skinner, D-Berkeley. “This is the Legislature’s budget. We are working hard to reach a three-party deal that includes the administration.”

Democrats in the Legislature took the same approach of passing a placeholder budget last year, when they hadn’t reached a deal with Newsom by the deadline as the pandemic forced them to cut billions in spending.

The Senate Budget Committee’s top Republican, Sen. Jim Nielsen of Red Bluff, criticized the maneuver at a hearing Monday.

“This is a fake budget,” Nielsen said. “It lets us get paid, but what we’re voting on is not going to be the budget.”

Nielsen also argued that the $267 billion budget passed along party lines Monday commits to too much long-term spending and doesn’t put enough into reserves, which could hobble the state in a future recession.

The spending plan lawmakers passed Monday aligns in many ways with Newsom’s budget proposal, including on providing tax rebate checks for people making less than $75,000, adding $1.5 billion for small business help and creating a new transitional kindergarten grade.

Newsom, Democrats differ on revenue outlook

But lawmakers crafted their budget based on higher tax revenue estimates than Newsom used for his plan. The lawmakers’ budget adds more long-term spending in areas including public health, preschool and child care.

In contrast, Newsom’s plan uses more of a projected surplus — $75 billion by his administration’s calculations — for one-time spending instead of committing the state to higher costs moving forward.

Lawmakers also went further than Newsom in expanding state-funded health care for undocumented immigrants. Newsom proposed expanding eligibility for the state’s Medi-Cal program to undocumented people over age 60. The lawmakers’ budget drops that threshold to 50.

Both Newsom and lawmakers want to spend more on homeless housing, but their plans differ on how to exactly spend the money.

The Senate passed the budget along a party-line 30-8 vote. The Assembly passed it 57-15, with Republicans and the chamber’s lone independent voting against it.

Skinner said using a higher revenue estimate means state government can help more people in the short term, even if some of those spending increases need to be cut in the future. She and other Democrats also say the revenue estimates they use from the Legislative Analyst’s Office tend to be more accurate than those from the governor’s Department of Finance, which Newsom relied on for his proposal.

California economy ‘poised to grow’

Legislative analyst Gabriel Petek told lawmakers Monday that his office indeed predicts that the California budget will have billions more than the Department of Finance estimated.

“The economy is poised to grow at its fastest clip in 40 years,” Petek said.

Using the higher estimate “concerns us because we think it adds an increased degree of risk,” said H.D. Palmer, spokesman for the Department of Finance.

“I’m grateful for the Legislature’s partnership and am confident we will reach a budget agreement that reflects our shared values and keeps California on a sustainable path of recovery and growth. I look forward to working with legislative leaders to reach an agreement that will address California’s longstanding challenges to give every Californian family – regardless of their race or zip code – the opportunity to thrive,” Newsom said in a statement after the budget passed.

Although they acknowledged that the bill they passed Monday is not the final budget, Democrats said they believe their plan will help the state recover from the pandemic with historic spending on the most vulnerable communities.

“This is a budget that I believe we will look back at very proudly. It’s an opportunity to invest in our state, not just next year but really for the next 50 years,” said Assembly budget chair Phil Ting, D-San Francisco. “It helps those that need the help the most.”

This story was originally published June 14, 2021 at 4:47 PM.