California governor’s $222 billion budget introduces ambitious new policies


California Gov. Gavin Newsom prioritized programs to combat homelessness, prevent wildfires and make healthcare more affordable as he unveiled his $222.2 billion 2020-21 budget Friday.

The expansive budget included much more than his stated trio of priorities.

The budget proposal anticipates a surplus for the seventh time in eight years even as spending increased by 2.3% from last year.

California Gov. Gavin Newsom cited two bond upgrades as he ticked off the state’s economic strengths in his 2020-21 budget unveiling.

Bloomberg News

The governor said he wanted to correct the “California derangement syndrome that the state’s best days are behind us and that we aren’t firing on all cylinders.”

The California economy has experienced 17 months of job growth creating one in seven of the nation’s jobs, has 3.8% growth in gross domestic product, and outperforms Texas, Florida and other states often seen as competitors, Newsom said.

“Our bond ratings have been raised, not once, but twice in the last 12 months,” Newsom said.

Moody’s Investors Service upgraded the state’s general obligation bonds to Aa2 from Aa3 in October. Fitch Ratings upgraded the state’s GO rating in August to AA from AA-minus. The state holds an AA-minus rating from S&P Global Ratings. All have stable outlooks.

“We are paying down our long-term obligations, we have innovation running through our veins and brains and we lead the nation in start-ups,” Newsom said.

He added that he is proud to be a Californian, proud of the state and proud of the budget, but he is “not naïve about the areas where we are falling short,” and said the budget is designed to tackle those areas.

The proposed budget anticipates ending the year with total reserves of $19.2 billion, of which $16.5 billion is in the Rainy Day Fund, $1.4 billion in the Special Fund for Economic Uncertainties, $900 million in the Safety Net Reserve, and nearly $400 million in the Public School System Stabilization Account.

The budget would make an extra payment of $9 billion over the next four years to pay down unfunded pension liabilities. This includes $3 billion to California Public Employees’ Retirement System and $2.9 billion to California State Teachers’ Retirement System on behalf of the state, and $3.15 billion to CalSTRS and CalPERS on behalf of schools.

He is working on a plan for California to become the first state to make its own prescription drugs, to “take the power out of the hands of greedy pharmaceutical companies.” California would contract with generic drug companies on behalf of its nearly 40 million residents and create a single market for drug pricing in California.

The governor also announced plans to launch a four-year, $1 billion revolving loan program to seed recycling, low-carbon transportation and climate-smart agriculture projects.

The budget would place an initial $250 million into a Climate Catalyst Revolving Loan Fund in July with three more installments to reach $1 billion by 2024. Projects would be chosen based on their ability to meet California’s environmental goals and the need to access low-cost borrowing and their ability to provide high-paying jobs.

That proposal is part of what Newsom said is a $12 billion Climate Budget over the next five years. The administration wants to ask voters to approve $4.7 billion of climate resilience bonds; Newsom’s budget includes Senate Bill 45, the $4.2 billion climate bond bill proposed by Sen. Bill Allen, D-Santa Monica, a two-year bill currently in the Senate’s appropriation committee.

Newsom also unveiled a California Consumer Financial Protection Law designed to fill what he called a “void” since the Trump Administration has gutted the federal bureau of the same name created through the 2010 Dodd-Frank Wall Street Reform and Consumer Protection Act.

The budget also includes $64.2 million to expand Medi-Cal to undocumented seniors, 65 and over, which Newsom estimated would add an additional 27,000 people.

“We believe in universal healthcare in this state,” Newsom said. “We think it’s the financially responsible thing to do. I am proud to support that expansion.”

Newsom teased Friday’s budget release with the announcement Tuesday that his budget proposal included $1.4 billion to bolster state and local efforts to alleviate homelessness. The proposal includes a new program to tap into Medi-Cal healthcare money to help the mentally ill find shelter and treatment. More than half of the funds would come from the federal government.

California had 128,777 homeless individuals last year — around one-third of all homeless people in the nation, according to estimates released Monday by the federal government.

Newsom will propose spending $1 billion to beef up firefighting crews and equipment, and clear forests of combustible trees and brush.

He separately proposed hiring 555 firefighters over five years and spending $100 million to make homes more resistant to wildfires as part of a $2 billion emergency services budget that also includes flood protection and high-tech mapping including areas prone to wildfires, floods, tsunamis and mudslides.

He signed an executive order Wednesday creating what he proposes to be a $750 million fund that providers could use to pay rents, fund affordable housing or help board and care homes. He’s seeking another $695 million in state and federal matching funds for preventive health care, but some of the money could also go to helping people find housing. And he ordered state agencies to free vacant state property to house homeless people.

Newsom’s budget introduction is the first step in approving a spending plan for California. In May, Newsom will revise his plan. State lawmakers, many of whom have their own ideas about what should be in the state budget, have until June 15 to vote on the budget proposal and send it to the governor for his approval.

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