Governor Gavin Newsom released his budget proposal Friday, and it is balanced — it even has a slight surplus of $363 million. But the proposal says it’ll take $7 billion from the state’s rainy day fund to get there.
“I don't understand how you can have a balanced budget and then pull money out of reserves,” said Central Valley Republican Assembly member Heath Flora, the vice chair of the Assembly budget committee.
California depends on personal income tax — especially from wealthy residents. Department of Finance Director Joe Stephenshaw said that could be a problem in the coming years.
“Our revenues don't necessarily always track with the underlying economy and [are] a reflection of the reliance on high income earners,” he said.
The state currently is getting a record amount of its funding from capital gains taxes.
The DOF also expects Southern California residents in wildfire zones to get a tax extension.
Homelessness
The Governor’s budget plan proposes a new state agency, the California Housing and Homelessness Agency, to streamline housing development efforts and the state’s response to the homelessness crisis. The proposal doesn’t include new funding for the administration, but indicates more details will follow in the spring once a reorganization plan is submitted to the Little Hoover Commission — an independent state oversight agency.
Newsom isn’t proposing additional funding for the Homeless Housing, Assistance and Prevention Grant Program that supplies counties with funds for homelessness prevention projects.
Department of Finance Director Joe Stephenshaw said the administration anticipates additional resources for homelessness to come from conversations with the Legislature in the coming months.
“In those discussions on those additional resources, we really want to ensure that there is a higher level of accountability and that's really the focus of the governor's budget at this time,” Stephenshaw said.
Additional accountability measures would include requiring local governments to adopt an encampment policy and meet certain metrics through local programs.
The proposal also includes $100 million in funds for encampment removals.
Ballot measures
Californians passed several ballot measures last November that showed up in the budget proposal.
Proposition 2 — an education bond — will help cover universal transitional kindergarten, which Newsom committed to fully implementing this year.
And a climate bond — Proposition 4 — will supplement the state’s wildfire response efforts and water security plans.
Proposition 36 is only sparingly mentioned. That measure increased penalties for theft and drug-related crimes.
Republican Assembly member and vice chair of the budget committee Heath Flora said that’s a problem.
“It will be very, very frustrating for Californians who voted over 70% in favor of this, if the Governor attempts to try to let that die on the vine,” he said.
The state is accounting for a slight increase in its prison population because of it, but projects a decline in the long run.
Wildfires
Last year’s state climate bond accounts for much of the funding allocated for wildfire mitigation projects for the upcoming fiscal year.
The administration also wants to provide tax exemptions for wildfire settlements through 2029.
This comes as devastating wildfires ravage Los Angeles communities. The Internal Revenue Service announced it would extend filing deadlines for those impacted by the disasters.
Stephenshaw said a delay in tax revenue wouldn’t necessarily impact the size of a potential budget deficit or surplus, but indicated it could cloud the ability to predict revenues.
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