Newsom budget: What to know on his spending plan – CalMatters

In summary

Gov. Gavin Newsom reveals his revised May budget, including his inflation relief plan and spending priorities on education, the environment and more.

“Simply without precedent.”

Gov. Gavin Newsom is a man of many superlatives, but even he seemed to struggle today to adequately describe just how much extra cash the state of California will have to spend in the coming year’s budget: $97.5 billion. 

In a press conference in Sacramento, Newsom unveiled his latest record spending proposal for the coming fiscal year. Riding a superheating economy and drawing disproportionately from the state’s highest earners, the state is now projected to have a surplus bigger than California — or any state — has ever had, and significantly more than the $76 billion that the governor predicted in January. 

Roughly half of the surplus is required by law to be spent on education. That leaves “only” roughly $49 billion in discretionary money, and the governor wants to reserve 99% of that for one-time spending: $18.1 billion to provide financial relief for Californians buffeted by inflation, plus $37 billion for infrastructure investments, including $5.6 billion for education facility upgrades.

A few of the other big numbers that Newsom mentioned today:

  • $128.3 billion in education spending, from transitional kindergarten through high school, a record-breaking sum that works out to $22,850 per student.
  • Another $23 billion will be parked into the state’s rainy day fund, to be drawn upon the next time the economy slows
  • $2.5 billion for housing, including $500 million to fund the conversion of vacant malls and storefronts into homes
  • An extra $3.4 billion to pay down state employee retirement debt

Now the ball is in the state Legislature’s court as they decide where they agree with the governor and which priorities they want to haggle over before the June 15 deadline to pass a final, balanced budget for the fiscal year that starts July 1. 

Today’s “May revise” rollout is part of the annual call-and-response between the governor’s office and the Legislature over how to spend your tax dollars. Each year, the governor sets the negotiations in motion in January with a preliminary budget proposal. This year, Newsom’s proffer included a record surge in K-12 education spending, along with multi-billion dollar proposals to ramp up the state’s wildfire prevention projects, convert more vacant hotels into housing for the homeless and open up Medi-Cal, the state’s health insurance program for the poor, to all undocumented immigrants.

What Newsom unveiled today is a retake on that earlier budget blueprint, but freshened up with new estimates of the state’s fiscal future. Tack on the extra surplus money and you end up with a new record-high total: $300.7 billion.

When discussing money on the scale of the California state budget, it’s easy to lose perspective. But to be clear, even by Golden State standards, that is an astounding amount of money. 

What a difference two years makes. In May 2020, with the state still weathering the first surge of COVID-19, the governor’s Department of Finance projected a $54 billion deficit and a year of Great Depression-level unemployment rates. Neither came to pass, just the opposite: Boosted by rosy economic conditions for the state’s highest earners and a massive influx of cash from the federal government, state coffers have been overflowing for the last two years.  

For the governor and Democratic leadership in the Assembly and Senate, having to divvy up billions of new dollars during an election year is a good problem to have. But on financial aid to struggling families, the scale of the state’s drought response, what to do about the sky-high price of gasoline and other pressing policy conundrums, not everyone is on the same page. 

The Republican minority in the Legislature is so diminished that Democrats don’t need their support to pass a budget. But that isn’t stopping GOP lawmakers from weighing in, if only to provide voters with a clear contrast as Election Day approaches.

“Newsom specializes in grand announcements and flashy sounding proposals, but he rarely follows through with effective solutions that actually help California families,” GOP Assembly leader James Gallagher from Chico said in a statement. “As Californians struggle to fill their tank and put food on the table, Democrats fail to provide any real solutions to cut costs.”