New­som pro­poses $209B bud­get

Pro­posal in­cludes boost to schools, fire pre­ven­tion; ad­dresses hous­ing needs, pay­ing down debts

The Mercury News Weekend - - FRONT PAGE - By Katy Mur­phy and John Wool­folk Staff writ­ers

Cal­i­for­nia’s pro­jected bud­get sur­plus has soared to a record $21.5 bil­lion, Gov. Gavin New­som an­nounced Thurs­day dur­ing his first state bud­get pro­posal in which he fi­nally put dol­lar signs be­hind some of the soar­ing rhetoric that de­fined his cam­paign and in­au­gu­ra­tion.

Now that he’s gov­er­nor, what does he plan do with those bil­lions?

In a packed news con­fer­ence that lasted nearly two hours, New­som pro­posed us­ing nearly half of the wind­fall to pay down the state’s debts and pen­sion obli­ga­tions and add to its re­serves while us­ing the rest to shore up fund­ing for the state’s pub­lic col­leges and uni­ver­si­ties, early child­hood ed­u­ca­tion, hous­ing pro­duc­tion, home­less ser­vices and other pro­grams for the poor.

A strong bud­get is also good news for K-12 schools and com­mu­nity col­leges, which would re­ceive $80.7 bil­lion — a new high — based on cur­rent pro­jec­tions, ac­cord­ing to the state’s con­sti­tu­tion­ally guar­an­teed fund­ing for schools.

“These dol­lars at­tach to real peo­ple and real peo­ple’s lives,” said the new gov­er­nor as he in­tro­duced a $209 bil­lion bud­get pro­posal, in­clud­ing $144 bil­lion for the gen­eral fund. With Cal­i­for­nia’s econ­omy still strong, the state ended up with a record sur­plus largely be­cause it spent less than

ex­pected on health care for the poor.

Some of the plan’s high­lights in­cluded:

• $3 bil­lion in pen­sion re­lief to school dis­tricts, many of which are strug­gling to meet their re­quired con­tri­bu­tions to em­ploy­ees’ re­tire­ment funds.

• A one-time, $750 mil­lion grant to en­cour­age all school dis­tricts to of­fer full­day kinder­garten.

• A $500 mil­lion one­time com­mit­ment to ex­pand child care ser­vices.

• A $1.4 bil­lion boost for higher ed­u­ca­tion to sup­port in­creased en­roll­ment, a tu­ition freeze and a sec­ond year of free tu­ition at com­mu­nity col­leges.

• $305 mil­lion in ad­di­tional fund­ing to thin forests, cut fuel breaks, fund con­trolled burns and other meth­ods of re­duc­ing fire risk.

• A dou­bling of the state’s Earned In­come Tax Credit, re­named a “Work­ing Fam- ilies Tax Credit,” to $1 bil­lion. It will help poor fam­i­lies with young chil­dren by pro­vid­ing a $500 credit for 400,000 ad­di­tional fam­i­lies.

• Nearly $200 mil­lion in gen­eral-fund dol­lars to ex­pand Medi- Cal avail­abil­ity to about 138,000 un­doc­u­mented im­mi­grants ages 19 through 25.

• $500 mil­lion for shel­ter ex­pan­sions and other home­less ser­vices.

But along with the spend­ing list, New­som also echoed some of the fis­cal cau­tion of his pre­de­ces­sor, for­mer Gov. Jerry Brown, not­ing con­cern about an even­tual eco­nomic down­turn that he said could cost the gen­eral fund $70 bil­lion over three years. He stressed that more than 86 per­cent of his pro­posed new spend­ing is one-time, rather than an on­go­ing fund­ing com­mit­ment, and he pro­jected a bal­anced bud­get over the next four years.

“To make the Cal­i­for­nia Dream avail­able to all, our state must be fis­cally sound,” New­som said in his bud­get pro­posal. “This bud- get lays a strong fi­nan­cial foun­da­tion for our state by elim­i­nat­ing debts, ex­pand­ing the rainy- day fund and pay­ing down our un­funded li­a­bil­i­ties.”

Apart from the marked dif­fer­ence in style — the slides, the lengthy ex­change with re­porters, the larger au­di­to­rium — the sub­stance of New­som’s bud­get pre­sen­ta­tion also in­vited com­par­isons to Brown.

While Brown ve­toed a bill to ex­pand state tax­credit in­cen­tives for hous­ing con­struc­tion, New­som en­ters of­fice with his own pro­posal to di­rect $500 mil­lion into such af­ford­able­hous­ing in­cen­tives and an­other $500 mil­lion to a loan pro­gram for low- and mid­dle-in­come hous­ing de­vel­op­ment — in ad­di­tion to grants aimed at nudg­ing lo­cal gov­ern­ments to en­cour­age more hous­ing con­struc­tion.

New­som on Thurs­day also threat­ened to with­hold cer­tain trans­porta­tion dol­lars from cities that fail to meet their hous­ing goals and chal­lenged Sil­i­con Val­ley com­pa­nies to help pay for sorely needed work­force hous­ing.

“It sig­nals that this is a gov­er­nor who gets that the state has to play a cen­tral role in fix­ing the hous­ing mar­ket — that it won’t get fixed with­out the state,” said Matt Sch­warz, pres­i­dent and CEO of the Cal­i­for­nia Hous­ing Part­ner­ship Corp., a San Fran­cisco-based af­ford­able hous­ing non­profit cre­ated by the Leg­is­la­ture three decades ago.

The Jan­uary bud­get pro­posal re­quired in state law is the first step of a month­s­long ne­go­ti­a­tion be­tween the gov­er­nor’s of­fice and the state Leg­is­la­ture that cul­mi­nates in mid-June. New­som’s pro­posal isn’t ex­pected to meet much re­sis­tance in the over­whelm­ingly Demo­cratic Leg­is­la­ture.

Re­pub­li­can Assem­bly­man Jay Ober­nolte of San Bernardino County said he ex­pected broad bi­par­ti­san sup­port for the gov­er­nor’s early child­hood ed­u­ca­tion push.

Other Re­pub­li­can law­mak­ers urged more fru­gal­ity. Assem­bly­man Vince Fong, R-Kern County, said in a state­ment that New­som’s bud­get amounted to an $8 bil­lion spend­ing in­crease, and urged de­vot­ing more to­ward bud­get re­serves, pay­ing off debt and in­fra­struc­ture. “Cal­i­for­ni­ans across our state un­der­stand that we must live within our means yet the gov­er­nor’s pro­posed bud­get con­tin­ues to spend pub­lic dol­lars at a record­set­ting level,” he said.

While New­som’s plan would chip away at the pen­sion fund­ing gap, the scope of the prob­lem is daunt­ing. The bud­get ac­knowl­edges a to­tal of nearly $257 bil­lion in un­funded pen­sion and re­tiree health care com­mit­ments. The main pen­sion fund for state em­ploy­ees, CalPERS, is short $58.8 bil­lion while the CalSTRS pen­sion fund for school em­ploy­ees is short al­most $103.5 bil­lion — of which the state obli­ga­tion is $35.3 bil­lion.

On wild­fires, New­som’s bud­get also pro­posed for the state to cover prop­erty tax losses in ar­eas of Butte, Lake, Los An­ge­les, Orange, River­side, Shasta and Siskiyou coun­ties that were dev­as­tated by fires be­tween 2015 and 2018.

New­som’s pro­posed bud­get doesn’t touch ei­ther of two con­tro­ver­sial con­struc­tion projects that Brown cham­pi­oned — a high-speed train con­nect­ing San Fran­cisco to Los An­ge­les or the Sacramento- San Joaquin River Delta tun­nels plan to help de­liver wa­ter from North­ern Cal­i­for­nia’s reser­voirs to the south.

But New­som sug­gested changes are com­ing. He said that he will of­fer more de­tails soon in a five-year cap­i­tal plan that his staff is putting to­gether. On high­speed rail, he said, “I pledge more trans­parency and ac­count­abil­ity.” And he hinted he may be will­ing to scale back the $17 bil­lion tun­nels project that is still not fully funded and faces years of law­suits from en­vi­ron­men­tal­ists.

“I am com­mit­ted to look­ing at this with a fresh set of eyes,” he said.

RICH PE­DRON­CELLI — THE AS­SO­CI­ATED PRESS

Gov. Gavin New­som presents his first state bud­get dur­ing a news con­fer­ence Thurs­day in Sacramento.

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