Guarding against uncertain economic headwinds, the Governor’s revised budget proposes investing record amounts in budget resiliency measures – from rainy day reserves to paying down unfunded retirement liabilities
Budget prioritizes one-time investments to tackle the affordability crisis that California families face on health care, housing, early education and higher education
SACRAMENTO – Governor Gavin Newsom Thursday released a revised state budget proposal that prioritizes saving for a rainy day – putting a record amount into the state’s reserves and making billions in fiscal pay downs of pension debt. It also prioritizes one-time investments aimed at tackling the main issues driving California’s affordability crisis.
“The California Dream must be built on a strong fiscal foundation,” said Governor Newsom. “This budget fortifies California’s fiscal position while making long-sighted investments to increase affordability for California families. The affordability crisis families face in this state is very real, and that’s why this budget tackles those challenges head-on by focusing on housing, health care, early childhood and higher education.”
Significant details of the revised budget include:
Building Resiliency and Preparing for the Next Downturn
The nation’s economic recovery is approaching its 10th year – almost the longest on record – and short-term revenues are increasing. However, California faces continued uncertainty from Washington and around the world. Accordingly, Governor Newsom’s revised budget allocates $15 billion to build budgetary resiliency and pay down the state’s unfunded liabilities, $1.4 billion higher than proposed in January.
This includes $4.5 billion to eliminate budgetary debts and reverse deferrals, $5.7 billion to build reserves, and $4.8 billion to pay down unfunded retirement liabilities.
Specifically, the state will continue to build reserves. The revised budget includes an additional $1.2 billion deposit into the Rainy Day Fund, bringing the reserve to $16.5 billion in 2019-20.
The Rainy Day Fund is now expected to reach its constitutional cap of 10 percent of General Fund Revenues in 2020-21, two years earlier than predicted in January.
The May Revision also seeks to eliminate state budgetary debts and reverse funding deferrals. This marks the first time in over a decade that all budgetary debts are completely paid off.
Confronting the Cost Crisis
While fortifying the state’s fiscal foundations, the revised budget also sets forth a series of proposals that help families confront the cost crisis.
The revised budget released today builds on the foundation set in January to fund a comprehensive early childhood plan, more affordable paths for higher education, and an expanded Earned Income Tax Credit. It also brings the state closer toward health care for all and takes meaningful steps to addressing the housing crisis. Significant investments to confront the cost crisis are included in the revised budget, which:
- Moves the state closer towards health care for all & single payer: The budget proposal maintains a number of the Governor’s budget priorities from January and moves the state toward health care for all while the state gears up for single payer. The Governor proposes making California the first state to expand Medi-Cal coverage eligibility to young adults ages 19 through 25 regardless of immigration status. The budget also proposes first-in-the-nation subsidies for middle-income earners to be able to purchase health care on the Covered California exchanges.
- Takes on California’s housing affordability crisis: The Governor believes California’s housing crisis is the fundamental economic challenge facing families in this state. The Governor’s January budget included $1.75 billion General Fund to increase housing production. The May Revision maintains this commitment to spur housing production, but refocuses $500 million to remove barriers to building mixed-income housing.
- Extends Paid Family Leave: The budget extends California’s Paid Family Leave program so newborns can be cared for by a parent or caretaker. The May Revision expands paid family leave for each parent to eight weeks, allowing parents to take up to four months of leave after the birth or adoption of their child.
- Proposes 2 years free community college tuition: Recognizing that California’s public higher education institutions remain the engines of economic mobility, the May Revision maintains funding for two free years of community college tuition for first-time full-time students as well as significant increases in funding for the California State University and University of California to prevent tuition increases in the budget year.
- Expands the Earned Income Tax Credit: The Earned Income Tax Credit is widely credited as one of the most effective anti-poverty measures in our nation’s history. Governor Newsom’s budget proposes big expansions to the Cal-EITC: A Cost-of-Living Refund, which helps economically distressed families with the costs of food, rent and child care. The May Revision proposes increasing the additional credit for families with young kids proposed in January, from $500 to $1,000.
- Largest-ever investment in K-12 schools: The budget invests in K-12 schools by providing approximately $5,000 more per pupil than 8 years ago, including additional investments to assist students with the greatest needs. It also increases the ongoing funding for Special Education by almost $200 million compared to the January budget proposal. The May Revision also makes significant investments in the recruitment and retention of qualified teachers by revamping teacher training and providing targeted service scholarships.
One Billion Dollars to Fight Homelessness
California is facing a homelessness epidemic across the state. This crisis is exacerbated by a health care system that does not adequately serve individuals with mental illness. The budget includes:
- $650 million to local governments for homelessness emergency aid.
- $120 million for expanded Whole Person Care services.
- $150 million for strategies to address the shortage of mental health professionals in the public mental health system.
- $25 million for Supplemental Security Income advocacy.
- $40 million for student rapid rehousing and basic needs initiatives for students in the University of California and California State University systems.
- $20 million in legal assistance for eviction prevention.
- Over $400 million to increase grants to families in the CalWORKs program.
Preparing for Emergencies
Since his first full day in office Governor Newsom has prioritized emergency preparedness, response and recovery. The Governor’s January budget proposed $769 million in additional funding to support the state’s wildfire prevention, response and recovery – investing in technology and resources to accelerate fuel reduction projects and launching the California For All Emergency Preparedness Campaign. The revised budget maintains these investments and adds an additional $39.9 million to enhance the state’s capacity to tackle more frequent and complex natural disasters.
Additional investments in the revised budget include:
- $5.9 million in ongoing funds to increase staffing and response capacity at the Office of Emergency Services.
- $2 million to create a permanent disaster response and recovery unit to tackle local housing issues through the Department of Housing and Community Development.
- $2.8 million to enhance the Department of Resources Recycling and Recovery’s ability to facilitate safe and timely debris removal.
- $1 million to the State Water Resources Control Board to increase response capabilities and address engineering and operations issues facing drinking water systems and wastewater utilities.
- $711,000 to initiate development of a statewide Disaster Reserve Corps.
Additional details on the Governor’s revised budget can be found at www.ebudget.ca.gov.