Newsom Introduces $286 Billion Budget Plan

By Justin HAGER

After surviving a recall challenge just three months ago, California Gov. Gavin Newsom said he was optimistic about the future as he unveiled a $286 billion budget proposal on Monday. While the plan is massive, about 9% bigger than last year’s record state spending proposal, it includes a surplus projected to be between 31 and 45 billion dollars. About $21 billion of that money will be used as a discretionary surplus but according to a California law that sets the state’s spending limit (or Gann limit), it is likely that about $2 billion in surplus funds will need to be returned to the taxpayers.

Newsom’s 2022-23 spending priorities are heavily focused on the continuing fight against COVID-19 and the costs associated with the ongoing response. This includes $2.7 billion to increase and accelerate the availability of COVID-19 vaccines, boosters, statewide testing and medical personnel and $3 billion to go toward paying the debt for unemployment insurance funds. The plan also attempts to help small businesses and local economies as they continue to struggle through interruptions caused by COVID-19. Small business proposals include $150 million for the COVID-19 Small Business Relief grant program, an additional $45 million in funding for travel and tourism relief, and $1.2 billion in federal funds for capital access for small businesses.

Other priorities in the proposal include:

  • Public education, where Newsom is proposing $21.8 billion in funding for higher education and $102 billion in spending on pre-K-12 education, with more than $1 billion earmarked for universal pre-K and $3.4 billion in before-, after- and summer-school programs with $937 million earmarked specifically for arts and music programs.
  • Fire management, where Newsom is proposing $648 million to support firefighters and acquire additional heavy equipment like helicopters and bulldozers; $750 million to help residents, farmers, and wildlife adapt to the ongoing drought; and $1.2 billion to improve forest management through forest thinning, fuel breaks, retrofitting structures and improving defensible space. 
  • Climate change and environmental sustainability, where Newsom is proposing $6.1 billion in incentives to expand electric vehicles; $4.2 billion on the controversial high-speed rail project; $3.7 billion on regional and local transit programs like light rail, ferries and bike lanes; and $2 billion for a clean energy investment plan focused on green hydrogen, de-carbonization, offshore wind and long-duration energy storage.
  • Homelessness, where Newsom is proposing $1.5 billion to expand housing for people with behavioral health conditions by providing tiny houses or other interim housing, $500 million to clear homeless encampments and house their occupants, $1 billion for urban housing development and conversion of vacant hotels and motels, including money to help cities pay for infrastructure improvements like roads and utilities, and $1 billion to promote affordable housing through low-income housing tax credits and other investments.
  • $255 million in grants to local law enforcement.

The State Constitution requires the governor to submit a balanced budget proposal to the legislature by Jan. 10 of each year. The proposal includes one- and two-year spending proposals for the fiscal year beginning July 1. After the governor submits his proposal, the legislature has until June 15 to pass the budget with the Legislative Analyst’s Office providing nonpartisan fiscal analysis throughout the process.

Despite California’s massive annual budget, much of the spending is non-negotiable due to voter initiatives that limit sources of revenue in general or tie specific types of revenue to specific categories of spending. For example, Proposition 13 of 1978 limits the amount of property tax that can be levied and increases state control over local finances; Proposition 4 of 1979 limits the amount of money that the state can appropriate; Proposition 98 of 1988 mandates funding levels from pre-kindergarten to community college.