The May Budget Revise Is Upon Us. How Did State Tech Fare?

Last week, Gov. Gavin Newsom unveiled his administration’s most recent plan to close the state’s current $27.6 billion budget deficit.

The “May revise,” as it’s known, is another look at the proposed budget and a chance to patch the gaping financial wounds inflicted by market volatility and tax shortfalls.

Earlier this year, the state faced a $37.9 billion deficit, prompting $5.2 billion in revenue and borrowing, $5.2 billion in delays and deferrals, $3.6 billion in reductions, and $3.4 billion in “shifts.” The dent that “early action” made in closing the gap was hampered slightly by what the governor called an “increased challenge” of $7 billion.

During a Friday press conference, Newsom reiterated that the current proposal is aimed at fixing this budget year and the next two years. The 2025-26 budget is expected to have an even bigger shortfall than this year at around $28.4 billion.

“Fundamentally, the approach we will be taking today is a little bit different than the approach we have taken in the past. We are not looking at the budget year alone, we’re looking at the budget year plus one, we’re looking at the next two years …,” he told reporters.

Despite all the talk of “belt-tightening,” sweeping (a.k.a. eliminating) 10,000 vacant positions in 2025-26, and trimming the fat off of the state government, not everything said Friday was bad news for tech. Newsom gave a nod to the potential of technology — like generative AI — to be used to streamline government services and for the need to continue investment in more efficient tools and enhancements to the procurement process.

The use of landlines and printed materials could also be on the chopping block in favor of digital solutions.

“We want to do what all of you are doing in your personal lives, what all the businesses out there are doing in their professional lives as well. We think we can do that and still achieve outstanding outcomes,” Newsom said.

The state is staring down the barrel of 260 different program reductions — both one-time and ongoing — totaling more than $15.2 billion in savings for the 2024-25 budget year and an additional $11 billion for the 2025-26 budget year.

One technology area that was called out by the governor was broadband expansion efforts, which are facing $2 billion in reductions.

“We’ve been stress testing our broadband strategy, the middle-mile and last-mile, and we think we’ve come up with a plan to actually achieve similar goals at a lower cost, so we think it’s appropriate to claw back those dollars without a diminution in terms of programming and advancing the commitments that we’ve made,” Newsom said.

While the exact details about program funding reductions have not yet been released, a nearly 8 percent reduction in operations will begin in this budget year, impacting nearly all department budgets across “personnel, operating costs, and contracting,” the May revision summary reads.

This sort of retraction is sure to impact technology contracting and the adoption of new solutions by all affected agencies.