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California To Cut Billions In Spending, Forecasts 22% Plunge In Revenues

SACRAMENTO (CBSLA/AP) — The coronavirus pandemic has thrust California into its worst economic despair the state has seen since the Great Depression, prompting Gov. Gavin Newsom to outline the painful cuts that are looming for the 2020-2021 budget.

"This is simply without precedent," Newsom said during a press conference Thursday.

The state has seen a 22.3 percent decline in revenue since January, and the forecast estimates over $54 billion in debt by summer of 2021.

Newsom confirmed that the revised budget included a proposed 10 percent pay cut to all state employees and a $19 billion cut to public education funding. He said he is relying on roughly $4 billion in federal coronavirus funding as one way to bring in more money for schools.

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"Negotiations will commence or continue with the state's collective bargaining units to achieve reduced pay of approximately 10 percent," a press release on the budget said. "The May Revision includes a provision to impose reductions if the state cannot reach an agreement. In addition, nearly all state operations will be reduced over the next two years, and nonessential contracts, purchases and travel have already been suspended."

Newsom estimates unemployment to climb to nearly 18 percent and tax revenues will drop by about a quarter, he said. While numerous programs will take a hit, the governor said he plans to fully fund unemployment benefits and protect health insurance subsidies.

He also eliminated a proposal to provide health care coverage to immigrants over 65 living in the county illegally, which would've cost an estimated $112 million. He similarly seeks to cancel other plans for expanding Medicaid.

The $203 billion budget proposed Thursday is about a 5 percent decrease from the current year's.

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

Newsom proposed spreading the use of California's Rainy Day Fund over the next three years, spending about half of it in the next fiscal year for an expenditure of $7.8 billion of the total $16.1 billion available in 2020-21. An additional $5.4 billion would be used in 2021-2022 with the remaining $2.9 billion being used the following fiscal year.

"COVID-19 has caused California and economies across the country to confront a steep and unprecedented economic crisis – facing massive job losses and revenue shortfalls," said Newsom. "Our budget today reflects that emergency."

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