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Politics & Government

Pandemic, climate change, homelessness highlight Newsom’s initial California budget proposal

Gavin Newsom masked - Govs Office.jpg
Office of Gov. Gavin Newsom
Governor Gavin Newsom signed the 2020 Budget Act on June 29, 2020.

Gov. Gavin Newsom on Monday laid out his plan for a record-breaking$286.4 billion California budget, which includes a $45.7 billion surplus.

Newsom’s proposal includes billions in new funding for what he deems “existential threats” to California's future: the pandemic, climate change, homelessness, economic inequality and public safety. Read the budget summary here.

The annual budget event— California governors are constitutionally required to present a balanced budget proposal by Jan. 10 — is just a wishlist; the spending plan will likely undergo changes during the six-month budget-building process, which includes negotiations between the governor and top legislative leaders. See a timeline of the process here.

Meanwhile, the state will continue to get a clearer picture of the state’s finances as revenue numbers crystallize before the June 30 budget deadline. The governor noted many numbers will shift before he revises his budget proposal in the spring.

Here are a few of the spending and policy proposals outlined in the governor’s spending plan:

COVID-19

On Saturday, Newsom announced he would seek $2.7 billion in additional funds to fight the COVID-19 pandemic.

He’s asking the Legislature to approve just over half that amount in the coming weeks in order to pay for increased testing, vaccination and booster campaigns, and staffing support for hospitals. That money would come from the current fiscal year.

The total COVID-19 package would include $1.2 billion to boost testing, including millions of antigen tests for local health departments, schools and community clinics.

Administration officials say 9.4 million test kits have now been delivered to county offices of education as part of Newsom’s promise that every student would get a test after the holiday break. According to the Los Angeles Times, less than half arrived before many students returned to classes last week, and as of Friday, 17 counties still had not received any tests.

California’s total number of hospitalizations is dangerously close to the peak of 53,000 during last winter’s surge. As of Saturday, 52,057 hospital beds were occupied, including patients with COVID-19 and other ailments. The administration is asking for $614 million to pay surge staff at strained hospitals.

Newsom is also calling on the Legislature to pass a bill for expanded sick leave for those who miss work over COVID-19, including to care for family. Previous supplemental sick leave expired last fall.

Homelessness

“This is the year” to cut red tape to get people off the streets and into housing, Newsom said. He’s proposing an additional $2 billion — on top of $12 billion allocated last year — to expand housing and behavioral health care.

The governor said he wants to “lean into conservatorships” to put some unsheltered people into treatment and housing.

“We need a few more tools to help people help themselves,” he said.

Some Republican candidates proposed something similar last year during the campaign to recall Newsom, but the governor said he was not aware of such proposals.

Climate Change

The governor wants to spend an additional $6.1 billion to shift toward zero-emission vehicles, including buses, trucks and new charging infrastructure for lower-income neighborhoods.

“For California, you can’t get serious about climate change unless you get serious about tailpipes,” he said. An executive order would ban all sales of new gas-powered vehicles in the state by 2035.

The budget proposal also includes $1.2 billion for wildfire and forest treatment projects, $649 million for firefighters and equipment, and $750 million for water supply projects.

Economic inequality

Newsom proposed a number of budget items aimed at helping economically vulnerable residents and small businesses, including:

  • Full Medi-cal expansion for undocumented residents by 2024. Currently, undocumented people under age 26 are eligile. Those over 50 will be able to get health coverage later this spring. Full expansion is projected to cost $2.7 billion annually.

  • Suspending the gas tax increase scheduled for July.
  • Continuing programs for free school meals and building a universal pre-K program. 

The governor did not propose an additional round of direct stimulus payments, which the state issued last year, but he left the door open to them if the state reaches a spending limit which requires some funding to be returned to taxpayers called the Gann Limit (more on that below).

Dealing with a surplus

Even before Monday's proposal, it has been clear for months California would have yet another surplus for Newsom to work with in this year's budget.

In November, the nonpartisan Legislative Analyst’s Office (LAO) estimated the state would see a $31-billion surplus for the 2022-23 budget year. California's final budget topped $262 billion last year.

Republicans have called on the governor to prioritize spending on water storage, additional beds at homeless shelters and mental health treatment centers, and a gas tax holiday.

They say the surplus “offers the chance to make wise investments that improve affordability, public safety, and opportunities for all Californians struggling to make ends meet.”

“Some areas of California are doing fine while others continue to struggle against high unemployment, budget-busting inflation, and California’s out-of-control housing and living expenses,” Senate Republicans wrote to the governor and top legislative Democrats in a letter last week.

The size of the surplus has also ignited discussion about the Gann Limit, a constitutionally required cap on state spending. If state revenues exceed the limit, which is based on previous years’ spending and growth, excess revenues are to be split between taxpayer rebates and funding for schools.

Lawmakers have some flexibility to avoid reaching the limit, according to a 2021 LAO report.

Newsom said his spring budget revision would have firmer numbers regarding the Gann Limit and spending options if it is reached.

Here’s a timeline of California's annual budget adoption process:

  • January: The governor submits a proposed spending plan to the Legislature by a constitutional deadline of Jan. 10. 

  • May: The governor refines the budget proposal using clearer revenue numbers provided by the Department of Finance. This is known as the “May Revise.”

  • June: Lawmakers have until June 15 to pass a budget. The spendingplan is generally spread out across multiple bills, including “trailerbills,” or smaller appropriations that can be passed after the June 15deadline. The governor must sign a budget by June 30.

Copyright, 2022, Capitol Public Radio