FROM BOOM TO BUST AND BACK TO BOOM
Newsom: $227.2B fiscal blueprint includes $5B ‘immediate action plan’ to help ease crisis
Six months ago Gov. Gavin Newsom was bemoaning the reversal of the Golden State’s fortunes, as his stay-home order to slow the coronavirus had constrained the economy and helped turn a projected $5.6 billion surplus into a $54.3 billion shortfall.
Although the pandemic crisis is far worse today than it was then, the state’s coffers are again overflowing with a $15 billion surplus in Newsom’s proposed $227.2 billion budget announced Friday.
“My, has so much changed,” Newsom said. “We are in a much better position than anyone could have imagined eight months ago.”
California Finance Director Keely Martin Bosler said the reversal in financial fortune is due to a combination of overly pessimistic projections earlier in the year, the unequal pandemic impacts on different job sectors and a stock market that “has gone up and up and up.”
But she cautioned against too much optimism. The projected surplus is followed over the next three years by anticipated annual deficits of around $10 billion. The surplus is also less than the $26 billion the Legislative Analyst’s Office had estimated in November. Bosler said the difference reflects accounting for filling reserve funds as well as recognizing the costs of last year’s wildfires and the pandemic response.
“Our future is very, very, very tenuous,” Newsom said. “So prudence, fiscal discipline, maintaining those frameworks is I think what this moment calls for.”
Nevertheless, Newsom is proposing significant new spending. His fiscal blueprint, which does not call for broad-based tax increases, includes what he referred to as a $5 billion “immediate action plan” to help ease the coronavirus crisis:
• $2.4 billion in a “Golden State Stimulus,” including $600 in direct payments to an estimated 4 million low-income Californians to help
them with rent and child care. The plan includes extending an eviction moratorium.
• $2 billion already announced to help school districts reopen classrooms through virus testing, decontamination, physical distancing and other associated costs.
• $575 million in small business grants, and $71 million in fee waivers for small businesses.
The budget also calls for:
• $85.8 billion for schools, which Newsom called the “highest investment per pupil the state has ever advanced.” It includes $4.6 billion to extend learning time in summer school, $250 million for teacher training and recruitment and $300 million for education programs for infants, toddlers and preschoolers.
• $1.5 billion for electric vehicle infrastructure.
• $1.75 billion for cities and counties to house their homeless residents, including funds to purchase motels and hotels, create new mental health housing and build homes for vulnerable seniors.
• $1.1 billion for Medi-Cal, the state’s version of the federal Medicaid program for the poor.
• $786 million in new money for the University of
California and California State University systems, with a promise of no tuition or fee increases.
• $1 billion for wildfire resiliency and emergency response, including $143.3 million for more fire crews, $48 million for new helicopters and air tankers, $17.3 million for an earthquake early warning system, and $39 million for LIDAR remote fire sensing.
• $372 million to expedite COVID-19 vaccinations.
The budget assumes $6.7 billion in anticipated federal support from the coronavirus relief package recently approved by Congress.
Assemblymember Marc Berman, D-Menlo Park, said he was “particularly appreciative of Governor Newsom’s commitment to supporting the basic needs of college students.”
Last year, Newsom made international news by announcing that it will be illegal to sell new gasolineburning cars in California starting in 2035 as a key part of the state’s plans to reduce greenhouse gas emissions that are causing climate change.
His budget Friday would devote $1 billion to grants and loans for new electric vehicle chargers, hydrogen fueling stations and other facilities, and another $465 million in incentives for electric vehicles, like the state’s Clean Cars for All program, which offers people up to $9,500 to scrap polluting vehicles more than 15 years old and buy an electric, fuel cell or plugin hybrid car.
“It’s great that Gov. Newsom is giving 100% emissions-free vehicles the investment they deserve as a key part of the transition away from fossil fuels,” said Brian Nowicki, California climate policy director at the Center for Biological Diversity.
San Jose Mayor Sam Liccardo said the budget provides much-needed help for cities grappling with homelessness amid the pandemic.
“Mayors throughout the state urged Governor Newsom to remain steadfast in his commitment to housing solutions, and he stepped up,” Liccardo said in a statement. “I am grateful for the governor’s continued leadership — this bold investment will enable us to bring thousands of our residents in from the cold.”
The state’s Department of Motor Vehicles would receive $152 million in onetime funding to hire more workers for the expected crush of demand for new driver’s licenses that comply with federal Real ID standards. Starting on Oct. 1, all adults will need to have an identification that meets those standards to get through airport security.
Newsom’s budget provides $13 million to implement a new law requiring the state Department of Justice, rather than local authorities, to conduct the investigations into deadly police shootings of unarmed civilians. The law was the most significant new policing legislation California
lawmakers approved during an abbreviated session last summer, following massive police brutality and racial justice protests.
California’s state prison system, which has seen serious COVID-19 outbreaks, would receive $283.1 million to cover the cost of expanded testing, cleaning, temporary housing and protective equipment.
Republic a n le a der s , whose party holds too few seats in the Legislature to have much say over the final budget to be approved in June, urged the governor to help students with mental health needs from the isolation of online “distance learning” and to fix the state’s Employment Development Department. The embattled EDD has suspended payments for more than 1 million unemployment claims in response to widening fraud woes.
“Over the past ten months, the Governor’s shutdowns and COVID-19 challenges have made it difficult for millions of Californians,” said Senate Republican Leader Shannon Grove, R-Bakersfield, and Sen. Jim Nielsen, R-Tehama, vice chair of the Senate Budget and Fiscal Review Committee, in a joint statement before the budget announcement.