Facing $54B shortfall, Gov. Newsom proposes using reserves, making cuts to balance budget

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SACRAMENTO, Calif. - California Gov. Gavin Newsom began revealing his plan Thursday for plugging an estimated $54.3 billion coronavirus-created hole in the state budget by drawing into state reserves to balance the budget and having to make unwanted cuts.

Though the state is facing bleak economic prospects and cities and counties are being challenged with unprecedented shortfalls, Newsom opened his pitch by addressing the challenges albeit with an optimistic tone.

He spoke, without notes, about protecting the state's four core values: Public education, public health, public safety and protecting those hardest hit by COVID-19, including the 4.6 million people who have filed for unemployment since March.

The peak of unemployment, he said, will likely peak at 24.5%.

"These are not normal numbers," he said.

So, how can he get the state to return to normal?

Newsom proposed spending the state's entire "rainy day" fund of $16.2 million over the next three years. In addition, he said the state could draw into two more reserve funds as well. In all, the money from these funds would be $8.8 billion - 16% of the shortfall.

The federal government CARES act money will also be able to contribute another 15%, he said. And three other categories could also get California to a balanced budget, Newsom said.

Of course, Newsom noted that making cuts might be inevitable.

Slashing programs could get California 26% of the way further to balancing the budget, though Newsom said he is loathe to do that.

"Nothing breaks my heart more than making budget cuts," he said. "There's a human being behind every single number."

He said if House Speaker Nancy Pelosis's $3 trillion HEROES Act is passed, these cuts likely wouldn't have to be made.

The House is expected to vote on the $3 trillion proposal on Friday, although it is considered dead on arrival in the Republican-controlled Senate.

This story was reported in Oakland, Calif.