Editor’s note: This is the first in a series of articles focused on California’s budget deal
Just in time for the start of a new fiscal year July 1, Gov. Gavin Newsom and legislative leaders announced Monday night that they have reached a deal on the state budget — a $310 billion spending plan that they say protects core programs and covers a $30 billion-plus deficit without dipping into key reserves.
Despite largely agreeing on the overall structure for weeks, budget negotiations were delayed by the governor’s demands to include a sweeping infrastructure proposal that many lawmakers resisted. The final compromise narrows the types of projects that can take advantage of an expedited approval of permits, leaving out a contentious proposed water conveyance tunnel under the Sacramento-San Joaquin River Delta.
“We are accelerating our global leadership on climate by fast-tracking the clean energy projects that will create cleaner air for generations to come,” Newsom said in a statement.
Senate President Pro Tem Toni Atkins, a San Diego Democrat, said she was “heartened” that the leaders agreed on the infrastructure package, and “in a way that focuses on equity by laying the groundwork to ensure that our most vulnerable communities will be hired first on impactful state infrastructure projects.”
The governor and legislative leaders also touted that they were able to preserve money for education and social service programs, and increase money for childcare providers.
Newsom also noted that the budget includes accountability measures for transit and homelessness, and tax credits for some industries.
“This is a budget for the future,” said Assembly Speaker Anthony Rendon, a Lakewood Democrat who is scheduled to hand over the speaker’s gavel to Assemblymember Robert Rivas, a Salinas Democrat, on Friday under a negotiated transition.
If all goes to plan, the main budget bill will be approved by both the Assembly and Senate today and signed by Newsom soon after. The Legislature began publishing a series of budget-related bills — reflecting agreements in specific policy areas — online Saturday morning to fulfill a requirement that they be available for public review for 72 hours before any votes.
Democratic lawmakers already passed a budget, reflecting their own priorities, on June 15 in order to meet a constitutional deadline. That kicked off a 12-day window for Newsom to sign or veto the bill, increasing pressure on the two sides to reach a deal by Tuesday.
This year’s negotiations were more fraught due to a $31.5 billion deficit, a sharp contrast with record budget surpluses the last two years. The deficit is the result of a downturn in the stock market — a volatile but significant source of California’s state revenues because of its reliance on income taxes, especially those of high earners. Bracing for potential further revenue declines, the budget deal allows the governor to delay, with notification to the Legislature, one-time spending commitments before March 1.
The budget process this year was also made more complicated when many Californians were granted until October, instead of April, to file income tax returns because of storm-related disaster declarations, which made it hard to pin down a precise figure on the state’s revenue.
Add to that Newsom’s insistence that legislators approve his recent proposal to overhaul the permitting process for major infrastructure projects by changing the landmark California Environmental Quality Act, a move that some housing advocates and developers have demanded for years.
The governor wanted a package of 11 measures, alongside the main budget bill, that aim to streamline the permitting process among federal, state and local governments; limit the time courts have to hear challenges on environmental reviews; and increase funding to state agencies.
Lawmakers pushed to consider the plan outside of the budget process so they would have more time to review its potential effects and to exempt the proposed Delta tunnel from the changes. That contentious $16 billion project would send water from the Sacramento-San Joaquin Delta south to 27 million people and 750,000 acres of farmland.
Here are some other highlights of the deal — how much the state plans to invest in other key policy areas that have been sticking points since Newsom kicked off the budget process in January with his initial proposal.
Social services and the safety net
Low-income families who receive state subsidies to pay for child care would see a near-elimination of copayments known as “family fees” under the budget bills that are part of the Legislature’s agreement with Newsom.
The fees, which can be hundreds of dollars a month for families, have been waived throughout the pandemic but were set to return at the end of September. Under the tentative agreement, families would not have to pay more than 1% of their incomes toward the fees.
The budget bills also include funding to raise pay for child care providers, who have demanded an immediate 25% increase in reimbursement rates (amounting to $1 billion a year) and a long-term plan to overhaul how those rates are calculated.
But how the funding gets doled out — whether the funding is a permanent raise or a temporary stipend — remains a sticking point between Newsom’s administration and the child care providers’ union. The parties are still bargaining a new labor contract for providers days before the current one expires.
In addition to other funds intended to help communities across the state recover from this year’s storms and flooding, the budget plan would provide direct relief to the towns of Planada and Pajaro. Both towns were partially under water after the winter storms. Now they are slated to receive $20 million each to help residents recover, regardless of their citizenship or legal status.
The agreement kills a proposal to create an unemployment insurance program for undocumented workers, who are ineligible for jobless benefits. Advocates had hoped to start a pilot program; then pushed instead for a working group to study the issue. Neither got the administration’s agreement in the budget.
The tentative agreement also includes $500 million to make permanent a temporary 10% increase in welfare benefits for recipients of CalWorks, the state’s cash aid program. But lawmakers couldn’t reach an agreement with Newsom’s administration on an Assembly proposal to loosen work requirements and lessen financial penalties for recipients, which could have weakened the ties between welfare and work and focused more on supportive social services that could help a family in crisis.
The Legislature did get its way in the agreement by rejecting a Newsom proposal to use half of the state’s $900 million in reserves for social safety net programs, with lawmakers reasoning the reserves should be saved for worse budget years.
— Jeanne Kuang and Nicole Foy
A hit on climate programs
California’s efforts to battle climate change — particularly programs to help switch to zero-emission vehicles and clean energy — appear poised to take a substantial hit in the budget agreement between Newsom and the Legislature.
Based on the June 15 budget approved by the Legislature, an estimated $5 billion, or 9%, will be cut out of $54 billion in climate climate projects established in the 2021 and 2022 budgets. The Legislature and the governor were still working out final details.
Newsom has said his budget proposals give priority “to communities that face disproportionate harm from pollution and the climate crisis.” But environmentalists say the reductions will keep California from meeting its targets for cutting greenhouse gas emissions and other air pollutants.
“These climate budget rollbacks undercut our state’s ability to meet our climate goals — pure and simple,” Mary Creasman, chief executive of the advocacy group California Environmental Voters, said in a statement. “The climate crisis isn’t taking a break in 2023, that much is clear, and neither can our climate action.”
Senate leaders in April proposed restoring some of the climate cuts but the governor’s office rejected that plan because it depended largely on tax increases and suspending corporate tax credits.
The $5 billion would be less than the $6 billion reduction that Newsom originally proposed in January. But environmentalists said even some of the wins will have mixed results.
For instance, regional transit agencies will be able to use money slated for clean energy infrastructure and the purchase of zero-emission buses for operations, Pew said.
Given how central a role public transportation plays in meeting greenhouse gas targets, the tradeoff was necessary, Pew said. The cuts do, however, endanger the state’s potential to electrify more buses.
“We love electric buses and want to see more of them and want to electrify the entire fleet but there is not much point to running electric buses if you don’t have a transit system,” Pew said. “It hurts to have to make that tradeoff, but from my perspective it is an acceptable one to make in this budget situation.”
To make up for the cuts, Newsom has said he is seeking federal climate funding from the Inflation Reduction Act and the Infrastructure Investment and Jobs Act. He also has asked the Legislature to seek voters’ approval of a climate bond, ranging from $6 to $16 billion.
— Alejandro Lazo
A mixed bag for K-12 education
The budget includes a historic, 8.22% cost-of-living adjustment for California’s public schools. The total Proposition 98 funding for the 2023-24 fiscal year will be $108.3 billion. But the governor and the Legislature also agreed to some hefty cuts.
First off is the $200 million decrease to the Arts, Music, Instructional Materials Discretionary Block Grant. Despite its name, school districts were allowed to use this money on everything from facilities to salaries. In January, Newsom proposed slashing $1.8 billion, but his office ultimately agreed to go with the Legislature’s smaller cut.
The governor and Legislature also met in the middle to reduce the Learning Recovery Block Grant by $1.6 billion, leaving $6.3 billion available to districts for helping students recover from pandemic-era learning loss.
In a big win for dyslexia advocates, the budget includes $1 million for the California Department of Education to form an independent task force that would compile a list of screening tools used to test students for difficulties with reading. California is currently one of 10 states that doesn’t screen all students for dyslexia, despite having a governor who’s been outspoken about his past struggles with the learning disability.
The $1 million is just the beginning. Districts will be required to screen all students starting in the 2025-26 school year, using one of the tools approved by the task force. Advocates, including classroom teachers, say it’s long overdue.
The budget also includes a $300 million “equity multiplier” allocated for schools with the highest concentrations of “socioeconomically disadvantaged” students, which includes students from low-income households, students experiencing homelessness and students whose parents did not graduate high school.
The state will also require districts receiving equity-multiplier funding to create plans to support student groups who performed lowest on one or more of the categories included in the California School Dashboard, which tracks suspension rates, test scores, chronic absenteeism and graduation rates.This component of the equity multiplier was not in Newsom’s original proposal and suggests concessions to advocates for Black students who had fought for all of this money to go to Black students, who are the lowest-performing on standardized tests throughout California.
— Joe Hong
