Newsom, California Legislature reach $351.7-billion budget deal

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Set us as preferred SACRAMENTO — Gov.Gavin Newsom reached an agreement Friday with legislative leaders on a $351.7-billion state budget in his final year as governor, a spending plan that uses a tax windfall to avoid major cuts and lessen California’s chronic deficit in the years ahead.The deal provides nearly $2 billion in state revenue next year through tax hikes on corporations, new levies on software sales and a revamped tax on managed healthcare organizations.

Lawmakers and the governor continue major investments in education, healthcare and agreed to increase spending on subsidized childcare and affordable housing.“We want to leave the next governor not only a balanced budget, but a budget that is substantially structurally sound, and we’re going to accomplish that,” Newsom said in an interview Friday.

“We were very cautious in terms of new spending,” The agreement ends weeks of lobbying by outside interests and negotiations among lawmakers and the governor at the state Capitol about how to handle a surge of income tax collected on stock market gains related to artificial intelligence.Early forecasts last June projected a $12.6-billion deficit in 2026-27, according to the California Department of Finance.Updated predictions now suggest the state will end the year with a surplus of $4.5 billion.

Democrats, following Newsom’s lead, are tucking away $6.4 billion for future years, which allows the governor to knock down a deficit previously projected through 2027-28 and assuage criticism about his spending habits.But economists say the fix and revenue increase is likely only temporary.

Spending in California has generally exceeded revenue growth during Newsom’s tenure in the governor’s office, creating a chronic shortfall.Despite the extra funding, the budget continues a trend of relying on reserves...