The Brief

California is in a budget hole, its depth measured not in feet, but in dollars.

How deep? A projected $38 billion deficit, according to Gov. Gavin Newsom, who said Wednesday he will declare a fiscal emergency if necessary and unveiled his initial plan to dig the state out of a fiscal chasm for the second year in a row.

But Newsom painted it as a return to a more normal budget, after recent spikes in revenue. He called it “a story of correction, a story of normalization after a period of tremendous amount of distortion.”

His deficit projection is far less dire than last month’s outlook from the nonpartisan legislative analysts, who projected that the state is eyeing a $68 billion deficit for the 2024-25 fiscal year, which starts July 1.

Crucially, Newsom’s team is assuming $15 billion more in revenues than the legislative analysts, explaining much of the difference in forecasts, based on the resilience of the economy.

“We’re just a little less pessimistic,” said Newsom, who repeatedly criticized the news media’s reporting on the Legislative Analyst’s Office’s figure. Basically, the administration is less concerned than the analyst’s office about an impending recession, added Joe Stephenshaw, Newsom’s budget director.

Newsom’s plan to close the deficit includes:

• Withdrawing $13.1 billion from the budget stabilization and safety net reserve accounts; 
• Cutting $8.5 billion from existing programs and services, including climate, housing and education; 
• Delaying $5.1 billion worth of spending, including on transit; 
• And deferring another $2.1 billion to 2025-26, including about $500 million in additional funding for University of California and California State University; 
• $5.7 billion in internal borrowing from special funds to support the tax on health care providers.
  

But he said he wants to protect investments in addressing homelessness, mental health reform, and public safety.

And major advocacy groups representing a range of interests — including public health, public school teachers, social service workers and regional transit agencies — thanked Newsom for recommending a spending plan that spares deep reductions to state services.

“We are relieved that Governor Newsom isn’t addressing the state budget deficit by mortgaging the futures of our students of color and multilingual learners,” Rachel Ruffalo, a senior director at the education advocacy group EdTrust-West, said in a statement.

However, some groups focused on climate and the environment are pushing back, criticizing Newsom’s proposed cuts and delays of $4.8 billion to various spending commitments.

“In this tight economic moment, we hoped for a more courageous proposal including solutions like a robust climate bond and ending corporate handouts,” Mary Creasman, CEO of California Environmental Voters, said in a statement.

All told, Newsom is proposing a total state budget of $291.5 billion — about $19 billion less than what he and lawmakers approved last June for 2023-24. But January plans are often revised considerably. Last year, Newsom proposed spending $297 billion; the final total in June was upped to $310 billion.
About 70% of California’s total state spending would go toward public schools, colleges and health and social services — a trend that’s held steady since the 1970s, according to a CalMatters review of state budget data.

Unlike the federal government, most state governments, including California, must approve balanced budgets — running a deficit isn’t an option. And California isn’t alone facing a shortfall — about half of Americans live in states now grappling with budget gaps, ongoing deficits, or both, according to an analysis by The Pew Charitable Trusts.

But many of the proposals outlined today will undoubtedly change in the months ahead. Following the usual process, lawmakers will hold dozens of hearings to evaluate the governor’s ideas and recommend their own before their June 15 deadline to pass a budget. The Legislative Analyst’s Office will produce independent revenue projections and policy suggestions as more data pours in. The state’s read on the budget starting July 1 will gain greater certainty in May when the governor will release updated revenue projections based on the personal income taxes Californians will have paid by April — and present revised spending proposals.

And while the deficit projected by the governor’s office is about 20% higher than what California faced last year ($32 billion, after two years of record surpluses credited to a healthy stock market and federal funds), experts say we’re not at crisis level just yet: The state is in a better position now to deal with the downturn compared to past deficits during the Great Recession after it put billions in reserves. Even after Newsom’s plan to pull from the state’s reserves, he says the state would have $18.4 billion remaining.

The state could also push for more savings through mid-year cuts in the current budget — something Newsom deferred to the Legislature. “Let’s have that conversation,” he said today.

Revenue misfire

In recent years, about 60% of the state’s general fund, the core source of government spending, was paid for by personal income taxes. And the top 1%, whose incomes swing wildly according to the vagaries of the stock market, have historically paid close to half of all income tax revenue for the state.

A main cause of the deficit is a $11.8 billion drop in 2023-24 revenues and transfers compared to what the governor and lawmakers expected when they finalized the current budget last June. The misfire is the result of both state and federal tax collectors giving nearly all Californians more time to file their income taxes due to last winter’s deadly storms.

That decision meant lawmakers and the governor lacked the usual data when they solidified the budget last year. As a result, they committed money they didn’t have to spending programs underway now.

Newsom had already signaled that California’s government needed more belt-tightening: On Dec. 12, his finance department directed state agencies to freeze spending, including new services contracts, IT equipment and vehicles. And last fall, he repeatedly cited the budget crunch in vetoing bills that he said would have added $19 billion in unaccounted costs.

The state budget is actually a multi-year math problem — with very real human consequences — that projects revenues for the year ahead and factors in surpluses or deficits in the current year and year before. One way to find savings is to delay, or outright cut, so-called one-time spending programs. These are typically trial runs of new social programs, construction projects, or experimental programs that last a few years. Last year’s budget projected that the 2024-25 fiscal year would include $12 billion in one-time spending; the Legislative Analyst’s Office said the figure is closer to $9 billion. The analyst’s office said those one-time projects, including $2.2 billion in transportation and $1.8 billion in education, could be on the chopping block.

Building the proposed budget is largely a closed-door exercise until the governor publishes his plan in January. Scott Graves, a budget expert with the California Budget & Policy Center, said that the governor’s office starts developing the January budget around May or June of the previous year.

“So advocates who want to influence what’s going to appear in the governor’s proposed budget will use whatever contacts they have within the administration to make their case for particular expenditures or policy changes that they would like to see included in the governor’s proposal in January,” Graves said in an interview.

That doesn’t mean the governor’s team will listen, but once a budget idea appears in the January draft, it has a strong chance of becoming law six months later when the Legislature and the governor finalize the state’s new spending plan.

Gov. Gavin Newsom discusses his initial 2024-25 budget proposal at the Secretary of State Auditorium in Sacramento on Jan. 10, 2025.

(

Miguel Gutierrez Jr.

/

CalMatters

)

If the first six months of the budget process is largely out of public view, the period between now and June is the public’s chance to weigh in, especially as the Legislature begins its numerous budget and subcommittee hearings starting in February.

In anticipation of today’s budget release, some groups started their asks early: The League of California Cities — one of the highest spenders on lobbying the Legislature — asked the governor in a letter last week for a $3 billion funding stream to increase affordable housing and reduce homelessness. For three years in a row, Newsom has granted $1 billion for local homelessness programs. 

Once again, Newsom’s proposed budget does not include an ongoing source of homelessness funding, though local officials and service providers say that relying on one-time grants makes it difficult to plan ahead.

“Without ongoing consistent funding, it means we’re going to have a dysfunctional homeless response system because our homeless response system never knows how much funding is coming from the state,” said Sharon Rapport, director of California state policy for the Corporation for Supportive Housing and member of the Bring CA Home Coalition.

Newsom also warned that cities and counties will face heightened scrutiny this year as they apply for and spend state dollars on their homeless communities. “I want to see these encampments cleaned up,” he said, “and I have not seen it as aggressively as I want to see it.”

Praise and blowback

Democratic leaders in the Legislature, who will play a key role in negotiating the final budget with Newsom, had similar responses to Newsom’s plan.

Senate leader Toni Atkins said the state is much better prepared than in 2010, when it had to cut programs and raise taxes on the middle class. Senate Budget Committee Chairperson Nancy Skinner said she appreciates the governor’s focus on protecting social services for needy Californians, “particularly our children, students, seniors, and those who rely on the state’s safety net.”

Assembly Speaker Robert Rivas said his caucus “is committed to fiscal restraint and spending oversight while delivering solutions to improve the quality of life for all Californians and protect the most vulnerable.”

But Republican leaders criticized Newsom and Democrats for not acting earlier to reduce spending.

“As the governor pulls revenue gimmicks and accounting tricks, it’s impossible to bury the truth: California is bleeding because of a decade of Democrats’ one-party rule and reckless spending,” Senate GOP leader Brian Jones said in a statement.

Vince Fong, the top Republican on the Assembly budget committee, said it’s premature to dip into the state’s “rainy day” fund and repeated the call for a special session on the budget. “Waiting will not absolve him of his lack of preparation, and will only cause more harm to the most vulnerable Californians,” Fong said in a statement.

His office shared an analysis showing that in the past three years, the Legislature and Newsom added more than $17 billion in ongoing spending. But that represents a small portion of the huge surpluses the state enjoyed in 2021 and 2022. Newsom said that 93% of the roughly $100 billion surplus in 2022 went toward one-time projects, such as short-term social programs, tax rebates and construction.

Meanwhile, the nonprofit California Budget & Policy Center took Newsom to task for not proposing new tax revenues, such as removing tax breaks for corporations and increasing taxes on wealthy residents. Newsom has already declared a wealth tax bill dead on arrival.

Newsom’s plan does call for some reductions, including a combined $4 billion in cuts to climate change and housing programs (more on that below).

Elsewhere, Newsom is proposing lowering by $500 million the amount of money public schools will have for constructing new buildings or maintaining existing ones — from $875 million to $375 million. He signaled, however, he’d support a bond measure on the November ballot that would potentially bring in billions for school districts to repair and upgrade aging buildings. The current school facilities fund is nearly empty, and the Legislature has been working for months to craft a borrowing plan that could win backing from the governor as well as voters.

Otherwise, TK-12 education funding remained mostly intact, with few changes to transitional kindergarten, community schools, special education, universal school meals and other programs the governor has championed. To support those programs, Newsom proposed dipping into reserves and cutting cost-of-living adjustments to the Local Control Funding Formula — from a record-high of 8.2% last year to less than 1% in 2024 — which may present challenges to districts also facing the loss of COVID relief funds and declining enrollment.

Newsom is also proposing to phase out nearly $500 million in no-interest loans to public colleges and universities for building additional student housing. That sum would affect 2024-25, but Newsom wants to totally do away with $1.8 billion for the loan program through 2028-29. Doing so would put a large dent in the state’s aspirations to lower the cost of student housing. Still, Newsom and lawmakers have approved $2.2 billion in the past few years to support the construction of subsidized residence halls for low-income students.

Also in higher education, Newsom seeks to cut a planned $289 million expansion of the newly revised Middle Class Scholarship, choosing instead to maintain it at its base level of more than $600 million annually. The scholarship has given an average of nearly $2,000 to more than 300,000 students when it debuted in the 2022-23 academic year.

Another large cut is pulling $300 million in promised funds to develop a new research center studying the human body’s immune system. The money was meant for UCLA, part of an overall $500 million package. But wealthy philanthropists have pledged more than $200 million to UCLA, and the school purchased a shuttered shopping mall rather than building a new site.

While some higher ed programs would take a cut, Newsom’s budget proposal avoids significant reductions to public safety programs and projects flat spending of about $18 billion at the California Department of Corrections and Rehabilitation. His administration has moved to close four prisons since he took office, a trend facilitated by the state’s declining prison population. He did not call for any additional prison closures in the new proposal, and his budget showed a 1.4% projected increase in the number of state prison inmates.

From 123,977 inmates on Jan. 1, 2020, the California Department of Corrections and Rehabilitation now houses 94,222 people. The administration anticipates the number will fall below 90,000 inmates by 2026-27.

In his press conference, Newsom emphasized that his planned overhaul of San Quentin State Prison into a rehabilitation center is the future he envisions for the state’s prisons.

“I see San Quentin as a catalyst for reform within the system,” Newsom said.

But a group representing domestic violence shelters, rape crisis centers and other crime victims’ advocates pointed out that Newsom’s proposal didn’t include their requests for the state to commit $200 million to backfill what they expect to be steep federal funding cuts. Those reductions, the group said in a statement, would result in “catastrophic” service cuts across California.

CalMatters reporters Nigel Duara, Carolyn Jones, Marisa Kendall and Jeanne Kuang contributed to this story.

In the wake of the Eaton Fire, Altadena and Pasadena’s music community have really shown up to support fire survivors, especially fellow musicians who lost instruments and record collections.

That effort continues this weekend with a special donation concert at a Pasadena record store, with the aim of getting vinyl records back in the hands of survivors who lost their collections.

“You know, our name is Healing Force of the Universe, and I think that gives me a pretty clear direction… especially after the fires,” said Austin Manuel, founder of Pasadena record store, where Sunday’s show will be held.

The record donation effort is the brainchild of musician Brandon Jay, who founded the nonprofit Altadena Musicians after losing his home and almost all of his family’s instruments in the Eaton Fire. Through Altadena Musicians’s donation and registry platform, Jay said he and his partners have helped some 1,200 fire survivors get their music instruments back.

Brandon Jay.

(

Robert Garrova

/

LAist

)

Now, that effort has fanned out to restoring vinyl record collections.

“All of that stuff evaporated for thousands of people,” Jay said. “Look at your own record collection and be like, ‘Wow, what if that whole thing disappeared?’”

You might know Jay from several bands over the years, including Lutefisk, a 1990s alt-rock band based in Los Angeles. He and his wife, Gwendolyn Sanford, composed music for TV shows, including Orange is the New Black and Weeds.

Jay plans to play some holiday tunes at Sunday's record donation show (which LAist is the media sponsor), along with fellow musician Daniel Brummel of Sanglorians. Brummel, who was also a founding member of Pasadena’s indie-rock sensation Ozma, said he was grateful to Jay for his fire recovery work and to Manuel for making Healing Force available for shows like this.

Brummel, who came close to losing his own home in the Eaton Fire, recalled a show he played at Healing Force back in March.

Ryen Slegr (left) and Daniel Brummel perform with their band, Ozma, on the 2014 Weezer Cruise.

(

Even Keel Imagery

)

“The trauma of the fires was still really fresh,” Brummel said. After playing a cover of Rufus Wainwright’s “Going to a Town,” that night — which includes the lyrics “I’m going to a town that has already been burnt down” — Brummel said his neighbors in the audience told him the rendition hit them hard. “It felt really powerful. And without that space, it just wouldn’t have occurred.”

Details

Healing Force of the Universe Record Donation Show
Featuring: Quasar (aka Brandon Jay), Sanglorians (Daniel Brummel) and The Acrylic.
Sunday, Dec. 14; 2 to 5 p.m.
1200 E. Walnut St., Pasadena
Tickets are $15 or you can donate 5 or more records at the door. More info here.

Topline:

The case: In September, the city settled a lawsuit brought forward by two brothers in their 70s who said they suffered serious injuries after an LAPD officer crashed into their car. Days before the $18 million settlement was reached, lawyers for the brothers said Feldstein Soto called an expert witness testifying for the plaintiffs and “attempted to ingratiate herself with him and asked him to make a contribution to her political campaign,” according to a sworn declaration to the court by the plaintiffs’ attorney, Robert Glassman.

The response: Feldstein Soto did not respond to an interview request. Her spokesperson said the settlement “had nothing to do” with the expert witness. Her campaign manager told LAist the city attorney had been making a routine fundraising call and did not know the person had a role in the case, nor that there were pending requests for her office to pay him fees.

What Jurado says: In a statement to LAist, Jurado said she wants to “make sure that the city’s legal leadership is guided by integrity and accountability, especially when their choices affect public trust, civic rights and the city’s limited resources."

What’s next: The motion needs to go through a few committees before reaching the full City Council. If it passes, the motion calls for the city attorney to “report to council in closed session within 45 days regarding the ethics breach violation and give updates to the City Council."

Every year in Santa Ana, Luis Cantabrana turns the front of his home into an elaborate altar in honor of La Virgen de Guadalupe that draws hundreds of visitors.

Along the front of the house, the multi-colored altar is filled with lights, flowers and a stained-glass tapestry behind a sculpture of the Lady of Guadalupe. Cantabrana’s roof also is lit up with the green, white and red lights that spell out “Virgen de Guadalupe” and a cross.

Visitors are welcomed with music and the smell of roses as they celebrate the saint, but this year’s gathering comes after a dark year for immigrant communities.

Luis Cantabrana stands in front of the stunning altar he built in front of his home in honor of La Virgen de Guadalupe. Every year, his display draws hundreds of visitors.

(

Destiny Torres

/

LAist

)

Why do they celebrate? 

In 1513, the Virgin Mary appeared before St. Juan Diego between Dec. 9 and Dec. 12, asking him to build a church in her honor. Her image — a brown-skinned woman wearing a green veil with her hands together in prayer and an angel at her feet — miraculously appeared on his cloak.

To celebrate in Santa Ana, worshippers gathered late-night Wednesday and in the very early hours Dec. 12 to pray the rosary, sing hymns and celebrate the saint.

Cantabrana has hosted worshippers at his home for 27 years — 17 in Santa Ana.

The altar started out small, he said, and over the years, he added a fabric background, more lights and flowers (lots and lots of flowers).

“It started with me making a promise to la Virgen de Guadalupe that while I had life and a home to build an altar, that I would do it,” Cantabrana said. “Everything you see in photos and videos is pretty, but when you come and see it live, it's more than pretty. It's beautiful.”

The Santa Ana home's elaborate altar in honor of La Virgen de Guadalupe draws hundreds of visitors each year.

(

Destiny Torres

/

LAist

)

Gathering in a time of turmoil 

Many also look to the Lady of Guadalupe for protection, especially at a time when federal enforcement has rattled immigrant communities.

“People don’t want to go to work, they don’t want to take their kids to school, but the love we have for our Virgen de Guadalupe,” Cantabrana said. “We see that la Virgen de Guadalupe has a lot of power, and so we know immigration [enforcement] won’t come here.”

Margarita Lopez of Garden Grove has been visiting the altar for three years with her husband. She’s been celebrating the Virgencita since she was a young girl. Honoring the saint is as important now as ever, she said.

“We ask, and she performs miracles,” Lopez said.

Claudia Tapia, a lifelong Santa Ana resident, said the Virgin Mary represents strength.

“Right now, with everything going on, a lot of our families [have] turned and prayed to the Virgen for strength during these times,” Tapia said. “She's a very strong symbol of Mexican culture, of unity, of faith and of resilience.”

See it for yourself

The shrine will stay up into the new year on the corner of Broadway and Camile Street.