SACRAMENTO — California Gov. Gavin Newsom proposed a $144 billion general fund budget on Thursday that’s up 4% from the current year and predicted a $21.4 billion surplus from robust tax collections and slower growth of state health care costs.
It’s the largest projected surplus since at least 2000, according to state finance officials.
The new governor’s budget devotes $13.6 billion of the windfall to build the state’s reserves and to pay down state debt and growing pension liabilities. It’s in keeping with his promise to follow the fiscally frugal path of his predecessor, termed-out Gov. Jerry Brown.
Like Brown, Newsom said he is girding the state against an inevitable recession.
“The message we are advancing here is discipline, building a strong foundation on which everything else can be built,” Newsom told reporters in Sacramento.
Newsom’s proposal kicks off negotiations with the Legislature. Lawmakers have until June 15 to approve a balanced spending plan or lose pay. The surplus Newsom projected is well over the roughly $15 billion predicted by the non-partisan legislative analyst’s office.
The extra $6 billion gives Newsom room to spend more on health care, education and housing. About 86% of his new spending is for one-time expenses, Newsom said.
He’s made early childhood education a central focus of his new administration. His budget proposes $750 million for kindergarten programs and $500 million for early child care infrastructure. He also wants to boost a tax credit for families by more than half-a-billion dollars and expand access to the credit to 400,000 more low-income workers.
Newsom brands his education focus as “cradle to career,” and his budget proposed $1.4 billion in fresh spending for higher education. Much of it, about $400 million, is for community colleges. Newsom wants them to use the money to make the second year of school tuition free, although it already is for many low-income students.
Housing, too, is a major focus in Newsom’s budget. California is experiencing a major affordable housing crisis, with the number of available homes far below the need and rapidly rising prices and rents.
Newsom’s pledging $1.75 billion toward the crisis, saying he’s “not playing small ball.” He wants to take a carrot-and-stick approach to incentivize communities to build more homeless shelters and housing, and he proposes threatening transportation money if local governments don’t meet their goals. That proposal may be controversial in the Legislature.
Newsom has also proposed expanding state-funded health care to low-income people living in the country illegally until their 26th birthday, up from a current cutoff age of 19. He wants to increase subsidies for people who buy their own insurance, rather than getting it from an employer or government program. His health proposals would cost $760 million a year.
Newsom emphasized paying off debts accumulated over the years. He wants to make a $3 billion one-time payment to California’s teacher pension fund on behalf of schools to help districts that are seeing more of their budgets eaten up by pension obligations.
Democrats praised Newsom’s ambitious proposals while Republicans said he wasn’t doing enough to guard against an inevitable recession.
Republican Assemblyman Jay Obernolte, vice chairman of the chamber’s budget committee, applauded Newsom’s plans to save money but questioned his efforts to expand Medi-Cal and other programs.
“We must remember that creating new programs that would only have to be cut in a recession would be foolish,” he said.
“The governor promised bold ideas when he was running, and he certainly moved in that direction today, said state Sen. Scott Wilk, R-Santa Clarita, whose district includes the Antelope Valley. “We can all agree that healthcare must be more affordable and accessible, a ZIP code should not determine the quality of a child’s education, and that we have many unmet social challenges — but how we pay for these expansions while effectively addressing a crumbling infrastructure and volatile tax base remains a challenge.
“I applaud his attempt to think outside the box and appreciate that many of these proposals are one time investments, but was disappointed to learn the governor has continued to fund the bullet train, rather than use those dollars on more pressing needs.”
Newsom teased big changes to the state’s juvenile justice program, pledging to end it “as we know it” and transition it to the state’s Health and Human Services Agency.
He also teased a restructuring of the state’s troubled high-speed rail project, one of Brown’s priorities, and barely mentioned climate change, another signature Brown issue.
Newsome also pitched a significant expansion of California’s paid leave program, which allows new parents to receive a portion of their paycheck while away from work following the birth or adoption of a child. Newsom wants to eventually offer six months of leave to be split between the parents, though his initial budget will include a smaller step in that direction.
California currently replaces a portion of wages for six weeks for new parents, and birth mothers can take an additional six weeks of disability leave. The program is funded through a payroll tax. It’s unclear how Newsom would pay for a full six-month program.
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