Gov. Gavin Newsom unveiled a $227.2 billion budget proposal Friday, kicking off a 6-month-long process to finalize a state budget for 2021-2022.
The proposal includes $14 billion in programs to assist workers and businesses impacted by the pandemic as well as to reopen schools. That includes nearly $5 billion Newsom will ask the Legislature to approve before the budget is finalized in June.
Newsom predicts $34 billion in what he calls “budget resiliency,” or a combination of reserves and discretionary surplus, with $15.6 billion coming from the state’s rainy day fund.
Even amid the coronavirus pandemic, Newsom’s $227 billion spending plan marks a record-high budget proposal. Keely Bosler, director of the Department of Finance, admitted “we got it wrong [last] April about how deep the recession was going to be.”
That’s due in large part to strong economic recovery among wealthier earners, whom the state relies on disproportionately for income tax revenue.
This is the beginning of an exhaustive process where state leaders decide how to spend California taxpayers’ money. Here's the timeline:
- The state Constitution requires the governor to submit a balanced budget proposal by Jan. 10. It's then introduced as identical budget bills in the state Assembly and Senate.
- By May 14, the governor will present a revised budget proposal. Last year, this included cuts to address a $54 billion deficit following the coronavirus pandemic. This is sometimes called the "May Revise."
- Lawmakers have until June 15 to pass the budget in the state Legislature.
Here's what you need to know from Newsom's proposed budget (read the full budget summary here):
The proposal includes $14 billion in programs for workers and businesses impacted by the pandemic-induced recession, school reopenings and zero-emission vehicle investments. That includes $2.4 billion for the "Golden State Stimulus" program to send $600 payments to low-income workers.
Newsom also wants to make available $575 million in grants for small businesses and cultural institutions, on top of the $500 million the state allocated in November. Another $777.5 million would go toward the California Jobs Initiative for jobs creation and retention, and $353 million for workforce development, such as apprenticeships.
Newsom wants $2 billion for safely reopening schools beginning in February, starting with the youngest students first. He’s also proposing $1.5 billion investment in zero-emission vehicles, arguing it will help create jobs.
The proposed budget notes a federal pandemic relief bill provided stimulus payments and a weekly $300 boost to unemployment benefits. “However, more federal relief is needed, as the economic impacts of the pandemic are projected to extend beyond the first quarter of 2021,” his proposal reads.
Public Health/COVID-19 Response
The proposal includes $2 billion to expand COVID-19 testing in California, plus $473 million to improve contact tracing and $372 million for vaccine distribution, Newsom said Friday. This is in addition to federal money for these initiatives. Newsom said during his announcement that he’s looking forward to partnering with President-elect Joe Biden to get more federal support for public efforts to slow the spread of COVID-19.
General Health Care
The budget proposal would funnel $195.1 billion into Health and Human Services, with $122 billion of that going toward Medi-Cal, the state’s low-income health program. The state anticipates enrollment in Medi-Cal will increase by nearly 12% next year, with 15.6 million Californians — or 40% of the state population — expected to be enrolled.
Newsom is proposing the return of CalAIM — a Medi-Cal overhaul that could make it easier for patients experiencing physical and mental health issues, housing challenges and substance abuse disorders to get their care all in one place, while also lowering the cost of care for those patients. The details have largely not been worked out.
The proposed budget does not set aside money to expand Medi-Cal eligibility to all California seniors, regardless of immigration status. Health advocates have been pushing for this in recent years, and have emphasized the need for the change in light of the heavy impact the pandemic has had on immigrant communities. Undocumented Californians up to age 26 are currently eligible for the program.
Education would receive more than one-third of the state’s budget under Newsom’s proposal, and that’s not including money for higher education. Nearly $86 billion would be spent on K-12, and $36 billion on higher education.
The proposed spending was done with the pandemic front of mind, as Newsom continues to push for a safe way to reopen the state’s schools this year. Newsom wants to tap a one-time $15 billion surplus and spend $2 billion to begin reopening schools starting this spring.
Newsom’s proposed budget includes $500 million in grants for infill housing projects, meaning those within or near established neighborhoods. Newsom said the money could be used to pay for sidewalks, roads, lighting and other expensive infrastructure costs that can slow or prevent development in communities across the state.
The spending plan also calls for $500 million in tax credits to spur the development of housing for low-income Californians. Those credits, which Newsom boosted from $85 million to $500 million in his first two budgets, are considered California's largest source of funding for affordable housing.
Additionally, the budget includes a “housing accountability unit,” which the administration can create without legislative approval, to ensure cities and counties are meeting their housing production requirements.
The governor’s plan has $1.75 billion in one-time money to buy more motels to house people experiencing homelessness and develop community mental health facilities. Newsom said this builds on what was spent last year on temporary and permanent housing — including Project Roomkey — to get people off the street.
California’s prison population has been steadily declining in recent years and saw a dramatic 20% drop last year due to the pandemic. As a result, the state plans to terminate its final remaining contract with a private prison by May, according to Newsom’s budget proposal. The state also plans to close the Deuel Vocational Institution in Tracy by September, as well as an additional, unspecified prison next year.
The scaled-back prison system is reflected in roughly $700 million in budget cuts for the Department of Corrections and Rehabilitation over the agency’s current budget. In the proposed $13.1 billion budget for CDCR, about $547 million would go to rehabilitation programs — including funds to expand technology availability for academic programs.
The budget also proposes spending about $13 million annually for the Department of Justice to investigate police shootings that result in the death of unarmed civilians.
The proposal calls for $2.9 billion for Cal Fire — $400 million more than last year. Fire prevention and emergency funds are part of the proposal, starting with $323 million for early action for fire prevention projects this spring and nearly three quarters of a billion dollars in forest health and fire prevention projects later in the year — both at the landscape and homeowner levels. It also includes $143 million for 30 additional fire crews and $48.4 million to buy Black Hawk helicopters and large air tankers.
The budget includes funding to adapt to climate change, including $1.5 billion to help meet the state's 2035 goal of having all new cars and passenger trucks sold as zero-emission vehicles and a similar 2045 goal for big-rigs. The funds would support low-income Californians' ability to purchase electric cars with incentive programs. This plan would also leverage private sector dollars to build charging infrastructure.
Around $385 million would be used to invest in sustainable agriculture and $300 million would be used to help state infrastructure become more resilient to changes in climate and weather. The proposal also prioritizes environmental justice by alotting $300 million in one-time funds to clean up and investigate contaminated properties in communities across the state starting with the most at-risk. There are also funds for earthquake preparation, capturing carbon, making the state more resilient to flooding and sea level rise and improving access to state parks.
A significant adjustment includes $4.8 million for 26 positions phased in over three years for increased oversight of the oil industry as the state pursues its climate goals.
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