As California faces a $54 billion budget shortfall, Congress prepares a second CARES bill to support local governments

California Governor Gavin Newsom announced Thursday that the state is now facing what could be a $54.3 billion dollar budget shortfall through 2021, a stunning reversal from the state's projected budget surplus just 90 days ago.

"We're projecting tens of billions of dollars of shortfalls all specifically related to COVID-19," said Governor Newsom during his daily briefing. 

The governor says devastating drop-offs in tax revenues and added costs involved with handling the coronavirus pandemic have devastated the budgets of California and states around the country. Newsom called for federal relief funds to help states recover.

"One thing we don't have in the state is a printing press," said Newsom, referring to the federal government's ability to print money and run deficits, which state and local governments are unable to do. 

Local municipalities are facing the same painful budget projections. 

This week, the National League of Cities, which represents some 19,000 cities, towns and villages in the U.S., called on Congress to include $500 billion dollars in funds to city governments in the next relief bill.

"While the different packages that have been passed already went to a number of different areas, they didn't address cities," said Mayor Tim McGallian of Concord, who serves on the group's federal advocacy committee. 

McGallian says Concord and cities nationwide already are having to make cuts to stay afloat.

"We've already started to see some decrease in revenues to the tune of almost between $5-7 million dollars," said McGallian, saying that is a significant amount for the city's total $110 million budget. 

Mayor McGallian says Concord has had to eliminate part-time workers, cut city council and top staff pay by 10%, and consider furloughs in the next few months. He says next year, Concord could see up to a $20 million budget shortfall.

That could force the city to consider layoffs, impacting the Concord police force and many other departments that are already lean due to years of cutbacks.

"This is your public works, this is making sure that the sewers still continue to operate, the public safety is still happening, this is your park and rec department, including our city staff as well," said McGallian. 

Leaders in Congress are debating the next step. 

House Speaker Nancy Pelosi says Democrats are moving forward with local government aid in a second CARES bill that could be ready for a vote next week.

"We prepare for CARES Two. CARES Two will honor our heroes," said Speaker Pelosi, "Our health care providers, our first-responders, police, fire, emergency services people, transit, food providers, the teachers, teachers, teachers."

Some critics say federal funds should not bail out cities that had budget problems pre-COVID-19.
Republican leaders have resisted giving funds to state and local governments, preferring to see the effects of the most recent trillion dollar aid package. 

"We can't keep throwing endless amounts of borrowed money at the problem and hope to fix it," said Senate Majority Leader Mitch McConnell of Kentucky.

Governor Newsom's revised budget proposal is expected to be released next week.