California Legislature Approves $300 Billion+ State Budget Proposal

The California legislature passed a $300 billion budget on Monday, angering some Democrats, Republicans, and Governor Gavin Newsom who wanted a budget with fewer longer term items over the record $97.5 billion surplus only being there for one year.

The overall passed budget is slightly more than Gavin Newsom’s $300.7 billion budget he sent in last month, but with many differences on where the money is actually going.  Under the Legislature’s budget bill, they plan to spend billions more than Newsom on education, with free college tuition going toward 150,000 more students than under the governor’s budget. Another $2 billion over the next 3 years would go toward student housing projects.

Another large program not on Newsom’s plan, a $1 billion per year program to help first-time home buyers by covering 20% of the purchase price, would potentially lower the median monthly mortgage payment by about $1,000 a month. However critics say that such a plan would not work due to sellers increasing the price even more, since they know that guaranteed funds would be attached to it. This is in addition to yet another increased annual cost, at least $400 million a year, going to a new earned income tax credit of at least $255 beginning next year.

Newsom and the Legislature do agree on many key points between the two budget proposals, with an expansion of Medi-Cal  to all Californians regardless of immigration status being a main highlight. However, expansion of state health care is a priority, with the budget putting nearly $2 billion into health care programs, including $100 million going toward creating generic insulin, and another $100 million going into trust funds for children who lost their parents to COVID-19.

Another part all sides agree on is helping find housing for those who are homeless or who have mental illness, with $1.5 billion tentatively earmarked over the next two years.

But, with a recession anticipated sometime next year, the Governor, Democrats, and Republicans are at odds over what exactly the budget should go toward in the long run, especially after surplus funds dry up. While the legislature’s plan would increase the state’s budget reserves to around $38 billion, both the Governor and legislative Republicans want more put away for a rainy day. The biggest stress point currently dividing everyone, is what to do about how much should be returned to California taxpayers.

Under Newsom’s $18.1 billion plan, $11.5 billion would go directly back to all auto-owning Californians through $400 checks similar to the $600 Golden State Stimulus checks released last year. Qualified low income tenants who requested rental assistance before March 31st would also be eligible to receive a small part of the $2.7 billion emergency rental assistance plan Newsom has as part of the package. This part would be only allowed for rent relief. Another part of the package would have $1,4 billion toward helping pay past due utility bills. $1.2 billion of that would specifically go toward electricity bills, with another $200 million for water bills. Diesel fuel tax would also be suspended for a year, costing the state $439 million, with $750 million going to free public transit to those who didn’t get car-ownership based checks.

However, the Legislature’s plan would only return $10 billion to Californians, with $8 billion going toward rebates not based on car-ownership like Newsom’s plan; $1.3 billion for small businesses; and $600 million in tax credits for low-income residents and workers who pay union dues. Republicans, meanwhile, continue to support a gas tax holiday, more water storage investments, and lowered costs for renters, among other budgetary requests.

With the Legislature’s budget proposal release on Monday, two days before the June 15th deadline, which would have seen them forfeit their salaries for a year if they didn’t pass it by the deadline, the Governor and both houses now have roughly half a month to agree on a budget before the July 1st deadline. While most legislative Democrats continue to push for longer-lasting projects whose expenses will not be covered by the surplus past 2023, the Governor, Republicans, and other Democrats are pushing for a budget with more short-term projects that can be adequately covered by the surplus with the anticipation of seeing where spending will be next year with new state income amount, likely without a surplus.

Praise, criticism of budget proposal

The Governor was especially critical of the legislative plan on Monday.

“While today is an important step forward, there is more work to be done. Governor Newsom would like to see more immediate, direct relief to help millions more families with rising gas, groceries and rent prices. The Governor’s plan includes an additional $3.5 billion beyond what legislative leaders have proposed to help millions more people meet everyday costs,” Governor Newsom’s Senior Advisor for Communications Anthony York said on Monday.

“And given the financial storm clouds on the horizon, a final budget must be fiscally responsible. The Governor remains opposed to massive ongoing spending, and wants a budget that pays down more of the state’s long-term debts and puts more money into state reserves. The legislative proposal is also silent on the Governor’s plan to shore up our state’s energy supply to ensure we can continue to keep the lights on as California wrestles with more extreme heat and weather.

“We look forward to working with the Legislature to craft a responsible budget that gets more Californians the immediate relief they need, meets our state’s energy needs and ensures long-term fiscal stability.”

California Department of Finance Chief Deputy of Budgets Erika Li echoed the Governor’s concern, saying that “We’re concerned the Legislature’s budget commits an unsustainable amount to ongoing expenditures. In the near future there will be a need to scale back or potentially even cut other programs.”

The GOP, unhappy with both budget proposals, criticized the Legislature’s proposal on Monday, stating that it gives no actual relief to Californians.

“There’s nothing in today’s proposal to bring immediate relief for Californians,” said Assemblyman Vince Fong (R-Fresno). “As the state coffers grow, family bank accounts are shrinking and Californians consistently pay more and more to Sacramento and get pennies back temporarily. That is not relief.”

Legislative Democrats vigorously defended their proposal amidst the high amount of criticism, stating that their plan would not push California over a fiscal cliff and would instead focus on middle class and below families.

“We should be supporting those families and households, middle class and below, that would be really struggling from these costs versus those with incomes for whom this would not be as much of a problem,” said Senator Nancy Skinner (D-Berkeley)”.

Assemblyman Kevin McCarthy (D-Sacramento) added, “This is the budget that you ran for office for.”

The state budget is due July 1st.