Every new year presents an opportunity to work with coalitions, advocates, and elected officials to craft legislation that will improve the lives of everyday Californians. While it is an exciting opportunity to work on shaping our state’s legislative future, it’s important to know these five major facts about how the annual California budget works.

1. There’s a process
In January, Governor Gavin Newsom and his team will unveil the proposed budget for 2023 based on the economic forecast. To be clear, we expected this deficit a year ago when we saw a dip in the stock market, high inflation and thus less taxes to be collected in the state. In May, a revised budget will present changes on the economic outlook. In July, the budget is passed by the legislature and signed by the Governor.

2. The overall problem
Inconsistency in our revenue creates an inability to properly budget based on taxes and the market.

3. The 2023 problem
For the first time since 2018, California is facing a budget deficit of nearly $22 billion. California’s revenue is largely based on income tax from our wealthiest residents. With the stock and real estate markets down, the collection of income taxes is also down, accounting for our deficit.

4. We have a reserve, but…
California voters passed an initiative in 2014 under the leadership of then-Governor Jerry Brown to create a reserve fund for economic downturns based on our volatile tax system. Governor Newsom has indicated that he is unwilling to touch the fund until we see updated numbers in the May revision. The Governor has indicated that he wants to save the reserve (which has around $23 billion) for a time in which we might see a greater economic downturn. 

5. The challenge
Now, more than ever, we must work with our coalition partners to ensure our collective priorities are equitably funded on a lower scale. We cannot allow ourselves to engage in financial jockeying, turning partners into competitors with our depleted budget.

As members of the justice and faith communities, our job at this moment is to work with our communities and elected leaders to ensure a calm approach that helps prioritize the most vulnerable. How we act in a deficit will define our true character as a state that seeks to lift up all voices and be a refuge to all who yearn for a safe space.