What to know About the California Budget

State lawmakers will vote on a $300 billion budget this week that will give most taxpayers a refund, increase abortion access, and provide health care to more undocumented immigrants.

Government leaders expect to sign off on the state spending plan before the start of the fiscal year on Friday after Gov. Gavin Newsom and legislative leaders announced an agreement on Sunday night. The budget has grown to record levels as the economy has recovered faster than expected from the coronavirus pandemic.

There were lengthy negotiations over whether to link tax relief to car ownership; funding increases for universities, housing, and social safety net programmes; the details of a major climate package; and a plan that would give state regulators more control in approving clean energy projects that Newsom worked out with Democratic leaders in the state Senate and Assembly for several weeks.

Legislative budget committees began debating today’s final deal, which contains $234.4 billion in general fund expenditure and was passed by the Legislature earlier this month to satisfy a constitutional deadline.

There were several changes made to the state budget, including the reduction of new spending commitments by several billion dollars at Newsom’s request. Reserves in the state’s general rainy-day fund will expand to over $38 billion, including more than $23 billion.

The Gann Limit, an obscure provision that forbids spending above a specific amount per capita, was avoided by state leaders as tax revenues soared as a result of enormous income growth among the wealthiest Californians. The state will remain below the limit for the next few years thanks to increased infrastructure and emergency expenditures, which are exempt in specific cases, and tax refunds. Now, lawmakers are debating whether to put a proposal on the ballot in 2024 that would relax the Gann Limit limits.

The budget deal’s centrepiece is the tax rebate programme, which has been contested in the public eye for months. More than 95% of taxpayers who earn up to $250,000 per year, or $500,000 if they file jointly, will receive a payout this fall under the $9.5 billion scheme. As a result, while a single taxpayer with a higher income will receive $1,050 in assistance from the programme, a family with children will only receive $200.

Supplemental Social Security payouts will be increased by around $39 per month for individuals and $100 per couple, while welfare handouts through CalWORKs will grow by an extra 10% for the next two years to reach Californians who do not file taxes.

The following are other noteworthy features of the budget agreement:

Investing in abortion access

As part of the state budget agreement, Democrats committed $205 million to improving reproductive health care infrastructure and ensuring that women seeking abortions can reach clinics. This investment solidified Democrats’ support for abortion access in California.

Uninsured and low-income women, including those who travel from out-of-state, will be able to access free abortions thanks to a one-time investment of $40 million. Additionally, $20 million will be allocated over the next three years to the California Abortion Support Fund to support low-income women who cannot afford to travel, stay in a hotel, or pay for child care to get an abortion.

By offering financial assistance to future physicians who commit to working in reproductive health care, the federal government will invest more than $60 million in strengthening its medical staff.

Other provisions of the funding agreement favour the passage of a package of 15 bills in the legislature aimed at increasing access to abortion. One-time payments of $20 million for abortion facilities to increase physical and digital security, $10 million for family planning services, and $15 million for community-based groups to boost sexual and reproductive health education are included in this package. Abortion providers in Medi-Cal will receive an additional $15 million in ongoing funding.

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Extending the social safety net

As part of the budget agreement, low-income undocumented immigrants of all ages will be eligible for state health coverage, while those 55 and older would be eligible for food assistance through the CalFresh programme. This would be the first time that a state has offered food stamps to undocumented immigrants in the country.

Additionally, low-income Californians will receive a financial boost through the CalWorks programme and assistance in paying utility bills that have been outstanding since the outbreak started. A new tax credit programme would provide $1,000 per year to former foster youngsters.

Allowing single parents to receive child support payments while receiving cash aid from CalWorks would cost the state more than $260 million, a shift from a long-standing state practice of retaining child support payments to repay itself for welfare grants. Parents presently receiving cash assistance will be able to obtain their full child support beginning in 2025 as part of a two-part strategy that begins with families already off CalWORKS.

When it came to eliminating the $300 late fee that courts often put on traffic citations and other violations, legislators and the governor reached a deal. Poor defendants who cannot afford to pay the first fine may see their fines balloon by as much as tenfold, according to civil rights experts.

The state would have lost $100 million if the fine was eliminated, something the Newsom administration refused to do. By agreeing to spend $10 million to forgive current debts and reduce the punishment to only $100, the state is encouraging civil rights groups to relaunch their lawsuit against the state court system, which has already been filed to challenge this new policy.

Boosting small businesses

Small businesses can finally breathe a sigh of relief. As part of the new agreement, the state will provide $250 million to small businesses and organisations to help offset the expense of providing up to an additional two weeks of paid sick leave for COVID-19, a requirement that the state imposed in February.

More aid will be coming down the line. The federal government loaned California a significant amount of money to meet the rise in Californians requesting unemployment benefits early in the pandemic. All employers will face tax increases beginning in 2023 to repay the debt. Until the $17 billion loans are repaid, that tax will rise by $21 per worker per year. As a result of the higher taxes, the budget allocates $500 million to help small businesses overcome the additional burden, and allocates $1 billion to pay down debt this year.

Additionally, the contract invests millions of dollars for enhancements to the department that processes unemployment benefits. This includes $10.2 million to strengthen its cyber security, $21.5 million for fraud investigation and prosecution, and $136 million for the first year of a multi-year modernization initiative for the Employment Development Department.

To lure jobs away from less progressive places, a budget trailer bill has been inserted. Efforts to encourage corporations to relocate employees away from states that restrict abortion access or “enable discrimination” based on sexual orientation, gender identity, or gender expression will begin in July 2023. In a speech in May, Newsom hinted at the notion, encouraging businesses to relocate to California, where “the principles that you espouse in your public documents are mirrored in terms of the work we perform.”

Another windfall for public schools

This year’s record-breaking budget for public schools follows last year’s record-breaking budget for public education. The base funding for the local control funding formula, which is used to pay most of the state’s public schools, has been increased by $9 billion, or 13 per cent, in the final budget deal. There will be considerably more money available for districts that serve a large number of foster kids, English language learners, and pupils from low-income families.

Since its debut in 2013, the formula has seen its greatest single-year growth. One-time funds from the state and federal governments haven’t been enough to cover districts’ continuing costs, such as salaries and benefits. However, the budget also contains $8 billion in learning recovery subsidies that expire in five years, on top of the billions already given to schools to deal with the fallout from the pandemic.

In addition to this extra cash, districts will be able to avoid a dramatic decline in funding due to the pandemic’s dwindling enrollment and attendance. School districts will be given the choice of adopting a three-year average or a pre-pandemic attendance rate applied to current enrollment to receive state money. Without these choices, public schools could have lost billions of dollars in financing.

Funding for pre-, after-, and summer school programmes has been increased by $4 billion in the budget. Three years ahead of schedule, the state has now exceeded its $5 billion budget objective for these initiatives. For $684 million, the governor and legislators also agreed to increase the number of children eligible for transitional kindergarten and decrease class size.

Without more instructors and aids, pupils can’t enjoy longer school days and smaller class sizes. Nearly $2 billion in teacher preparation and retention programmes are included in the budget to help schools deal with a persistent staffing shortage.

More student housing, but more aid?

Hundreds of millions of dollars will be earmarked for college and university construction projects and student housing, as part of the final budget agreement. A major concern for legislators and student advocates is that Newsom’s plan does not contain financial increases for the University of California and the California State University system beyond those sought by the Legislature.

If the state has funds in the 2024-25 fiscal year, a multi-year attempt to increase financial help for older students will be supported. Additional 150,000 students will be added to the Cal Grants programme under the budget agreement, which will cover the cost of tuition at public universities, partially cover the cost of tuition at private institutions, and provide additional living grants of approximately $1,650 to community college students.

The Cal Grant presently benefits around 500,000 students. It would cost over $300 million a year to expand. No one can say whether or not California will have the money to continue expanding its Cal Grant programme after that period. But that state agency in charge of it has been given $500,000 to begin making modifications.

More money is almost certainly on the way. The state is increasing grant funding for UC and CSU students by more than $500 million to achieve the objective of “debt-free” higher education. And students who already receive a Cal Grant and are enrolled full-time at a community college will earn up to $8,000 in subsidies, which is a significant increase from previous years.

There is also $1.4 billion allocated to public colleges and universities for the construction of affordable student accommodation for the upcoming year. However, this may only provide capacity for roughly 6,000 additional student beds due to high building costs despite a far bigger need. UC, CSU, and community colleges will receive $4 billion in grants and loans over the next four years as part of a four-year plan to spend $4 billion on student housing.

Money for mental illness courts and homebuyers

California Gov. Gavin Newsom’s ambitious and divisive plan to use the new court system to force persons with serious mental illness into treatment is still making its way through the Legislature and will be voted on shortly. As a result, $39.5 million has already been set aside for this year and $37.7 million in continued annual financing for the programme known as CARE Court to pay for training, court costs and legal representation.

$1.5 billion in two years will be used to provide interim housing for persons who are homeless and have a major mental illness, which is the most significant amount of the governor’s proposed homelessness budget. Despite the money being available to establish additional treatment beds, it will primarily be utilised to support existing facilities that serve patients with severe mental illness after they leave an inpatient programme. Though many concerns remain regarding how many beds the money will pay for, in what types of facilities, and where they would be situated, the administration plans to prioritise CARE Court participation.

Cleanup of encampments and the construction of affordable housing will receive additional billions of dollars.

This year, a new rule went into force that shortens the deadline for communities with noncompliant housing element plans to finish their lengthy and intricate rezoning from three to one year or risk losing affordable housing assistance. Los Angeles and other Southern California towns, however, have been given a three-year reprieve in the current budget package, as long as their plans are approved by the state, allowing them to rezone to accommodate additional housing.

Proposals to support first-time homeowners with down payments, in exchange for the state adopting an ownership stake, were passed by both houses of Congress. Profits from the sale of these properties would be placed in a revolving fund to help future homebuyers. For the program’s start-up costs, lawmakers agreed to allocate $500 million in the budget deal, which is half of what they had originally requested. In the first year, an estimated 4,000 homebuyers could benefit from the initiative, with higher allocations conceivable in the future.

Gas taxes and high-speed rail

With rising pressure from Republican legislators and a growing number of Democrats, the budget does not include a broad suspension of state gas taxes, which are scheduled to increase by three cents on July 1. It will save businesses $439 million by temporarily suspending a component of the diesel sales tax, resulting in a 23-cent per-gallon reduction in pricing.

After a protracted battle with the state legislature over the future of California’s high-speed rail system, the governor prevailed. For more than a year, lawmakers refused to release the project’s final $4.2 billion in bond financing to redirect construction efforts in Southern California and the Bay Area. It’s not clear how much of a role an independent inspector general would have, but the money will certainly continue to prioritise the initial rail link between Merced and Bakersfield.

Fixing cannabis market

The elimination of the cultivation tax in California will be a great help to small farmers who have battled to keep their farms operating as the price of cannabis crops has dropped significantly. Three years from now, the state may begin hiking other cannabis taxes to compensate for the loss of money that covers child care, environmental cleanup, and impaired-driving-prevention initiatives. In the event of a shortfall, the budget allocates $150 million. For the following few years, social equity licence recipients may be able to claim $10,000 in tax credits to assist their enterprises to get off the ground.

Preventing prison staff misconduct

It was more than a year ago that the Office of Inspector General found that the state prison system’s personnel discipline procedure was “broken.” Newsom and legislators agreed to spend more than $30 million per year for the next three years to fix this problem.

One of the goals is to fix a system where 98% of prison personnel are exonerated of misbehaviour allegations and to do this, a centralised screening team will be established to assess complaints from prisoners, their relatives, and others. Retaliation against convicts who file grievances will be avoided with this adjustment.

Prisons have had to change their complaint procedures before. When the department’s former grievance system was overhauled just two years ago, the number of complaints that were dismissed climbed.

Health care access and affordability

As a result of the budget agreement, California will be the first state to provide health care to all people, regardless of immigration status. Undocumented adults between the ages of 26 and 49 will be eligible for Medi-Cal, the state’s Medicaid programme for the needy, beginning on January 1, 2024. As many as 700,000 additional people are projected to be eligible for the programme, which is currently open to children, young adults, and the elderly regardless of immigration status.

Over the next four years, California expects to spend $352 million to expand its behavioural health, public health, primary care, and reproductive health workforce, as more individuals are insured and need care. In addition, health workers on the frontlines of the COVID-19 pandemic will get $1.3 billion in retention bonuses under the proposed budget.

When it comes to healthcare, the Golden State is on a mission to cut prices. A yet-to-be-identified medication producer will get $100 million from the state as pledged to assist in the development of the state’s first-ever low-cost insulin. Long-delayed health care affordability legislation is also moving forward, with the creation of an Office of Health Care Affordability that will be responsible for monitoring and setting cost targets for the various stakeholders in the industry.

In 2026, the office will be able to begin enforcing its laws. A penalty could be imposed on health care providers that fail to reach their goals Such an institution is critical to protecting Californians from financial ruin in the long run, say consumer health groups who have lobbied for its establishment.

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