Editor’s Note: This is the second in a series of articles examining the state budget passed by the Legislature on Tuesday.
Education
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
More in-state slots at UC, CSU
More admissions letters for California undergraduates, a fulfilled promise to increase state support for public universities, vows to further grow the state’s financial aid program for the middle class, and expanded affordable student housing are the key features in the deal crafted by the Legislature and Newsom.
The University of California will need to enroll 7,800 more in-state undergraduates this fall and be expected to educate another 8,800 California students by 2026.
The move doubles down on the state’s commitment to maintain access to the selective public institution. Part of the plan includes giving the UC $30 million to enroll 900 fewer out-of-state students, who pay three times as much in tuition, to make way for an equal number of California residents.
Under the same deal, the California State University system is expected to grow its in-state undergraduate enrollment by 4,000 students for the coming academic year and add another 20,000 seats by 2025.
While the budget deal fulfills Newsom’s ongoing promise that state funding for the UC and CSU grow by 5% each it won’t be enough money to address the CSU’s recent revelation that they take in far less revenue than they need to support their students.
The Middle Class Scholarship is also set to get a previously promised $227 million this fall, which should net most in-state UC and CSU undergraduate students several hundred more dollars toward their education this fall.
The deal so far also ensures $2.2 billion in affordable student housing grants is on the way — enough for at least 11,000 beds. The UC, CSU and community colleges were going to receive state funding directly, but will now be expected to issue bonds that the state will pay off. The funding switch shouldn’t slow down campus construction, an analyst at Newsom’s Department of Finance told CalMatters.
Finally, the three systems will gain access this year to another $200 million in zero-interest loans to build student and staff housing — part of a revised plan to ultimately receive $1.7 billion in state loans by 2028, short of the original $1.8 billion by 2024-25 promised last year.
— Mikhail Zinshteyn
Fixing a typo on community college funding
In addition to a financing change for student housing — instead of cash financing, community colleges will have to issue bonds, which will free up more money this year — the budget deal fixed the governor’s prior typo: All colleges — not just Los Angeles — will see new funding for LGBTQ students.
The deal also includes new reporting requirements about CalFresh in an effort to promote more collaboration between county agencies and the UC, CSU, and community college administrators who sign students up for food benefits. The requirements come after a change from the federal government has put some students in jeopardy of losing their benefits.
— Adam Echelman
Status quo on homelessness
The proposed budget also allocates funding to one of the state’s most pressing problems — its massive homelessness crisis. It pours $1 billion into round five of the state’s Homeless Housing, Assistance and Prevention program, which doles out money local officials can use for housing, outreach at encampments, emergency shelters and more.
This marks the third year in a row the program would receive $1 billion from the state budget. Collectively, the state has allocated nearly $21 billion to housing and homelessness since the 2018-19 fiscal year, according to the Legislative Analyst’s Office.
But this year’s figure is sure to disappoint homeless advocates and local government leaders who wanted more from the Newsom administration.
With an estimated 171,521 unhoused residents, California is home to nearly one-third of the country’s entire homeless population. And local leaders and activists say Newsom’s current approach — handing out one-time grants every year instead of guaranteed ongoing funding — is hampering their efforts to make a dent in the problem. The League of California Cities, which asked for a guaranteed $3 billion a year, earlier this month said it’s “incredibly disappointed” in the budget’s lack of ongoing funding.
— Marisa Kendall
New money for down payments
In the final hours of negotiations, a few big-ticket spending programs on housing were saved from the chopping block.
Earlier this year, the governor proposed closing the deficit in part by clawing back funds set aside for a downpayment assistance program. The California “Dream For All” program was open for just 11 days this spring buyers hoovered up its initial $300 million allocation. But over Newsom’s earlier objections, the fund will be reinflated with another $200 million.
The final budget also restores $50 million each for two grant programs — one to help homeowners get started on building secondary units and another for first-time homebuyers.
And the city of Fresno will be getting $250 million to update and revitalize its downtown infrastructure, but over three years, and not all at once as Newsom initially proposed.
But budgets aren’t just about spending money. Sometimes they’re used to make — or, in this case, underscore — policy.
Case in point: The city of Santa Ana was called out in all but name in the final budget.
Just last week, the Orange County city opted to exempt vast swaths from two state laws designed to make it easier for developers to convert old strip malls, parking lots and defunct office buildings near public transit into new apartments. The Legislature passed the streamlining bills last year and they are set to go into effect on July 1.
On June 20, the Santa Ana City Council exempted more than 600 parcels, instead putting forward alternative sites for fast-tracked development. That was over the objections of state housing regulators, who questioned whether the new proposed sites would actually allow for enough new housing to make up for the exempted parcels.
The resolution in Santa Ana passed easily, so any disagreement the state still has may have to be resolved in court. But if any other cities are planning to try the same maneuver, California’s budget-making legislators are one step ahead of them.
Call it the city of Santa Ana honorary anti-loophole amendment: The budget now stresses that if a city exempts a commercial parcel from fast-tracked conversion, it has to make up for it by fast-tracking permitting at an alternative site that realistically could provide just as much housing, if not more.
— Ben Christopher
A big deal for Medi-Cal
The final budget deal provides more detail on how the state will use revenue from its Managed Care Organization tax, levied on Medi-Cal and commercial health insurance plans and that helps the state receive matching federal dollars. (Health plans agree to this tax because they are eventually paid back.)
This MCO tax is set to generate $19.4 billion for the state from April 2023 through the end of 2026. About $11 billion of that will be used in part to boost pay for Medi-Cal providers, who have long criticized the state for its low reimbursement rates that they say limits the number of low-income people they can serve. The rest will be used to help cover shortfalls in the upcoming and future state budgets.
In the 2023-24 budget, specifically, the state will receive $4.4 billion from the MCO tax, of which $3.4 billion will go to the General Fund. The remaining $1 billion will go toward:
- Increasing reimbursements for Medi-Cal providers in primary care, maternity care and non-specialty mental health starting in 2024. This group will see a new Medi-Cal reimbursement floor — 87.5% of what Medicare, the federal health insurance program for seniors and people with disabilities, pays for the same services. In Medi-Cal, some of these services are currently reimbursed at 60% of what Medicare pays;
- $50 million to help rural hospitals come into compliance with the state’s seismic mandate, due in 2030;
- $150 million to the distressed hospital loan program for public and nonprofit hospitals in financial trouble, bringing the total available for that purpose to $300 million;
- $75 million to the University of California to expand its graduate medical education program, in an attempt to produce more physicians.
The newly minted deal also directs the state to increase reimbursement for other types of Medi-Cal providers and services in future budgets. Among providers and services to be included: specialists, women health providers, hospital emergency services, ground emergency transport services, and behavioral health in long-term care settings. The deal also fast tracks how quickly these other providers can see their payment boosts — now a five-year timeline. Newsom’s budget in May proposed an 8-to-10-year period.
“It’s hard to overstate how big this is for patients,” said Dustin Corcoran, CEO for the California Medical Association, a group involved in these negotiations. “We want to get to a place of equity in health care, and equity in health care means everybody has access to a physician and needed services. This agreement puts us a long way down the road to accomplishing that.”
— Ana B. Ibarra
A consumer win on Covered California
Health care watchdogs scored another win in this year’s budget, successfully negotiating ongoing investment in the state’s Covered California cost-sharing reserve after months of pressure from consumer advocates and legislators. Advocates and lawmakers were miffed when Newsom’s January and May budget proposals moved more than $333 million from the reserve into the General Fund and grew increasingly frustrated upon learning that the state failed to invest a cumulative $1 billion to lower out-of-pocket health insurance costs.
In 2020, Newsom proposed and lawmakers approved a polarizing tax penalty on Californians without health insurance to help fund a cost-sharing program for people insured through Covered California, the state’s version of the Affordable Care Act Marketplace. The penalty generates more than $300 million annually, but has only been used to lower costs once.
The deal this year ensures that the penalty money goes directly into a cost-sharing reserve fund instead of the General Fund. It does approve a $600 million loan to the General Fund to help address the state’s $31.5 billion shortfall, but it commits $82.5 million to lowering health insurance costs over the next year and $165 million annually. The $600 million will be repaid in fiscal year 2025-26.
“This is a huge win that could allow us to do something big as soon as next year,” said Diana Douglas, director of policy and legislative advocacy at Health Access California, who has been lobbying for this change since 2019.
The deal provides enough money to eliminate deductibles for approximately 950,000 enrollees with Covered California with mid-tier plans, Douglas said.
— Kristen Hwang
