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. Combined, that funding would pay for 55,000 new housing units and treatment slots.
Newsom said he wants to “find a bridge to permanent supportive housing, such as tiny homes and procuring treatment slots” to transition people from living on the street. He also wants to “lean into conservatorships” to put some unsheltered people into treatment and housing.
“We need a few more tools to help those that clearly can’t help themselves,” he said. Newsom declined to elaborate further, saying he would provide more details in the coming weeks.
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.
The budget proposal includes $500 million for local governments to clean up encampments and move unsheltered people into transitional housing.
“Bottom line is the encampments out on the streets and sidewalks are unacceptable. It’s inhumane,” he said. “People are dying. I don’t think this, I know this.”
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 emissions from tailpipes,” he said. In 2020 he issued an executive order to 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, including prescribed burns, reforestation, fuel breaks, grazing and new technology to help detect fires early. That funding is in addition to $1.5 billion approved last year.
“CalFire and [the Office of Emergency Services] haven’t had these kinds of discretionary resources in the past,” Newsom said. “The importance of making sure these dollars are spent wisely — that’s our collective job.”
In addition, the governor is proposing $648 million for firefighters and equipment, including air tankers, engines and bulldozers.The proposal also includes $750 million for water supply projects, in addition to the $5.2 billion allocated last year.
Economic inequality
Newsom proposed a number of budget items aimed at helping economically vulnerable residents and small businesses, including:
- Expansion of Medi-cal to all low-income residents regardless of immigration status. Currently, undocumented people under age 26 are eligible. 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).
Newsom’s proposed budget also did not address a renewed push for single-payer health care from Assembly Democrats.
“I think that the ideal system is a single-payer system,” he said, before adding: “this is hard work. It’s one thing to say. It’s another to do.”
The governor has written to President Joe Biden and former President Donald Trump previously to ask for flexibility for states to implement such a system.
He also said the current proposal has not been sent to him and he has only read about it in the news.
“Beyond that, I don’t know what they’re proposing,” Newsom said.
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 for 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 spending plan is generally spread out across multiple bills, including “trailer bills,” or smaller appropriations that can be passed after the June 15 deadline. The governor must sign a budget by June 30.
