Home > News > News Articles > 2019 > June > State Budget Sent to Governor Continues Prudent Approach; Trailer Bills to Follow
News Feed

State Budget Sent to Governor Continues Prudent Approach; Trailer Bills to Follow

Legislature Passes FY 2019–20 State Budget with Additional Funding for Services for the Homeless, Safe Drinking Water, Investment in Infrastructure and Emergency Preparedness and Response

June 14, 2019
The Legislature agreed to invest in significant new investments to shelter homeless Californians, expand housing-related infrastructure and provide safe drinking water to all residents when they passed the FY 201920 Budget Act on Thursday, June 13, which establishes the state’s financial plan for the fiscal year that begins July 1.
 
Associated trailer bills are expected to be approved in the coming weeks.
 
The architecture of the final budget largely reflects the framework and funding levels proposed by Gov. Gavin Newsom, with a total spending of $214.8 billion, and an additional $19 billion set aside in the state’s “rainy day” reserves.
 
Despite a healthy surplus of nearly $20 billion, most of these excess funds are used prudently to repay debts and obligations and prefund state and school pension obligations. Where new expenditures and program expansions are made, they are often one-time allocations or accompanied with sunset dates.
 
In a compromise with the Legislature, the budget does not contain the “water tax” that was proposed in January to invest in water system improvements, but instead commits $130 million of Cap-and-Trade funding in the next year and additional funding through 2030 to provide safe, affordable drinking water to California communities whose residents are being exposed to unsafe drinking water in their homes and schools.
 
In January, the Governor announced a strong commitment to strengthen the state’s disaster preparedness, response and recovery. This final spending plan reflects that commitment, including significant investments to support the state’s emergency preparedness, response, and recovery infrastructure.
 
The final budget consists of one of the most significant housing and homelessness-related investments in modern history, as more than $2 billion in one-time funds will help with planning grants, housing-related infrastructure, homelessness services, mixed-income loan programs and an expansion of the state’s Low Income Housing Tax Credit Program. While these allocations are helpful, the League remains watchful for the details of housing-related trailer bills, for provisions that could affect land use or local transportation revenues. The three-day print rule will ensure transparency. Many trailer bills are still being negotiated and will be voted on in the coming weeks.
 
The budget also addresses two other priorities identified by the Governor. It proposes to expand Medi-Cal coverage to young adult immigrants who are undocumented and living in California, and permits Covered California to provide subsidies to middle class residents, which will be funded by a new mandate that requires all Californians to possess health insurance or pay a fine.
 
League Statement on the Budget
 
Following the Legislature’s approval of the budget, Carolyn Coleman, League executive director issued the following statement:
 
“The League of California Cities applauds Gov. Gavin Newsom’s Administration and the Legislature for negotiating a budget that provides billions of dollars to help cities address the homeless crisis, plan for housing, invest in infrastructure to support housing and fund affordable housing.
 
“This budget is a result of a valuable partnership between the Administration, Legislature and California cities. For months now, the Administration and Legislature have traveled the state to listen to locals, understand local concerns and develop collaborative approaches to address significant quality of life concerns for our residents.
 
“The League appreciates the support and expanded resources for California cities. This partnership demonstrates what we can accomplish when we work together to meet our state’s housing and homeless needs.”
 
Detailed budget areas of importance to cities are outlined below.
 
Housing, Community and Economic Development
 
The FY 2019-20 State Budget allocates more than $2.4 billion, a historic level of new funding, to help address homelessness and affordable housing needs throughout the state. Below is a breakdown of the budget agreement as it relates to housing and homelessness.
 
Short-Term Planning and Infill Infrastructure Grants
$750 million in one-time funding is allocated to increase housing production and provide technical assistance to local governments. These include:
  • $250 million for technical assistance for local governments and councils of government (COG) to develop plans that include but are not limited to: streamline housing approvals, complete California Environmental Quality Act (CEQA), improve permitting or rezoning to increase density; and
  • $500 million for the Infill Infrastructure Grant Program administered by the Department of Housing and Community Development (HCD). This program provides assistance, available as gap funding to infrastructure improvements required for specific residential or mixed-use infill development. All of the funds are allocated through a competitive process, based on the merits of the individual infill projects and areas.
While the $750 million has been allocated in the state budget, the implementing budget trailer bill is still under negotiations and will be voted on during the next couple of weeks. For additional information about the budget trailer bill, see the trailer bill section below.
 
Funding for Housing Tax Credits and Moderate-Income Housing Production
$1 billion to help spur the production of housing that is affordable to moderate-income and low-income households. These include:
  • $500 million General Fund one-time funding for the development of moderate-income housing. The California Housing Finance Agency will expand the existing Mixed-Income Loan Program that provides a lower subsidy than traditional state housing programs.
  • $500 million, and up to $500 million annually thereafter, upon appropriation, for affordable housing tax credits as follows:
    • $300 million to the existing housing tax credit program that targets new construction projects that pair with the underutilized 4 percent federal tax credit program; and
    • $200 million to a new program targeting housing projects for households earning between 60 and 80 percent of area median income.  
Legal Aid for Renters and Landlord-Tenant Disputes
$20 million to provide grants to nonprofit service organizations to assist with landlord-tenant disputes, including legal assistance for counseling, renter education programs and preventing evictions.
 
Enforcement of State Housing Laws
$1.4 million to compensate the Attorney General’s office for costs incurred as a result of additional workload created by operation of AB 72 (Chapter 370, Statutes of 2017). AB 72 allows HCD to find a city's housing element out of substantial compliance if it determines that the city, county, or city and county acts or fails to act in compliance with its housing element, and allows HCD to refer violations of law to the Attorney General.
 
Homelessness
 
General Fund One-Time Funding for Homelessness
Last year, $500 million in one-time funding was allocated to local jurisdictions to address emergency homelessness needs. This year’s budget allocates $650 million in one-time funding for jurisdictions that site and build emergency shelters, navigation centers or supportive housing. It is unclear how this new funding will be distributed to cities, Continuums of Care and counties. The allocation amounts will be determined in an upcoming budget trailer bill that will be voted on in the next few weeks.
 
Whole Person Care Pilot Programs
$100 million (one-time with multi-year spending authority) is allocated for Whole Person Care Pilot programs that provide housing services. These programs coordinate health, behavioral health (including mental health and substance use disorder services) and social services. This funding will be used to match county investments in health and housing services with a focus on the homeless mentally ill population.
 
No Place Like Home
A $7 million loan for cash flow needs is provided to the No Place Like Home Program (NPLH) until the NPLH bonds are issued in fall of 2019. The program dedicates up to $2 billion for the development of permanent supportive housing for persons who are in need of mental health services and are experiencing homelessness, chronic homelessness or those who are at risk of chronic homelessness. Bonds are repaid by funding from the Mental Health Services Act.
 
Surplus State Property
$3.4 million to implement the Governor’s proposal to permit development of affordable housing on state-owned land.
 
Pending Potential Budget Trailer Bills
 
RHNA Reforms and Linking Transportation Funding to Housing
The Governor’s original proposal attempted to make significant changes to the Regional Housing Needs Assessment allocation process, enhance the powers of COGs, provide incentives to cities as housing is produced and link SB 1 transportation funding to compliance with housing element law, zoning and entitlements. Following several months of negotiations, the Governor released a much improved housing trailer bill, but there were additional negotiations on this issue that are not yet reflected in the printed versions available. We expect to see a $250 million grant program available to COGs and cities and counties for housing related planning. The Legislature has rejected efforts to link to SB 1 transportation funds.
 
Changes to Enhanced Infrastructure Finance Districts
This Governor proposed to expand the use of Enhanced Infrastructure Financing Districts (EIFDs) authority by removing the 55 percent voter approval threshold to issue debt. Sen. Jim Beall (D-San José) has a very similar bill, SB 128, pending in the Assembly. The Governor has also proposed tax conformity with federal opportunity zone investments in affordable housing and green technology. It is unclear whether there will be a trailer bill that touches on this issue.
 
CEQA Streamlining for Homeless Shelters
The Administration seeks to grant homeless shelters, navigation centers and new supportive housing units the same streamlined environmental review recently given to sports stadiums. The expedited CEQA review will accelerate judicial review of challenges to an Environmental Impact Report.  
 
Department of Transportation (Caltrans) Airspace for Emergency Shelters
This budget trailer bill includes the development of a statewide policy for the use of Caltrans airspace, or land located in the state’s highway right-of-way, for emergency shelters, expanding on 2018 legislation that allowed for such spaces on up to 30 parcels in Oakland, San Jose, Los Angeles, San Diego and Stockton.
 
Environmental Quality
 
TheLegislature’s budget addresses several key issues for cities including creating a stable funding source for safe and affordable drinking water programs, increasing the state’s aid to communities affected by recent wildfires and allocating Cap-and-Trade dollars towards city interests. Below is a breakdown of the budget as it relates to environmental quality and disaster and emergency response.
 
Statewide Disaster and Emergency Response
Given the intensity and frequency of the state’s recent wildfires, the budget includes over $300 million for disaster preparedness alone, including communications infrastructure and new funding to help communities affected by disasters.
  • $75 million to improve resiliency of the state's critical infrastructure in response to investor-owned utility-led Public Safety Power Shutdown actions;
  • $28.75 million in additional funds to the California Disaster Assistance Act to repair, restore or replace public real property damaged or destroyed by a disaster and to reimburse local government costs;
  • $50 million to immediately begin a comprehensive, statewide education campaign on disaster preparedness and safety, focusing on community engagement and public education in high risk areas;
  • $25 million General Fund for mutual aid assistance for pre-positioning of existing California Office of Emergency Services (Cal OES) and local government resources;
  • $1.1 million for new fire engines from the Greenhouse Gas Reduction Fund (GGRF);
  • $15 million for the California Department of Forestry and Fire Protection (CAL FIRE) to procure innovative solutions to combat wildfires and enhance fire protection. This includes allocating $4.6 million dollars to contract for a large C-130 air tanker to respond to wildfires during the peak fire season;
  • $27.48 million to Cal OES for disaster preparedness and response, including mission tasking;
  • $5 million for the Defensible Space Assistance program;
  • $25 million for Cal OES to support activities directly related to regional response and readiness;
  • $21 million in one-time funds for local assistance for capital outlay to rebuild camps destroyed in Woolsey and Tubbs Fires, including the Wilshire Boulevard Temple Camps, the Shalom Institute Camp and Conference Center, and the Camp Newman in Santa Rosa; and
  • $2.8 million for CalRecycle to establish a dedicated team to help facilitate timely, safe, and effective debris removal operations as well as to assist local governments in the preparation of Debris Removal plans for future incidents.  
Funding for Disaster-Impacted Communities
The Legislature has made allocating resources towards restoring fire-affected communities one of their top priorities this year. The budget proposal includes over $53 million in direct funding for communities impacted by recent disasters. Earlier this year, the Governor passed legislation that allocated $64.3 million in property tax backfill for cities, counties and special districts affected in 2017 and 2018. Of the $64.3 million, $31.3 million was allocated to backfill property tax losses incurred because of wildfires including current year losses for Butte, Lake, Los Angeles, Orange, Riverside, Shasta and Siskiyou Counties, as well as estimated losses in 2019–20 and 2020–21 for the Counties of Butte and Lake. This budget proposal builds on this prior legislation to help allocate more resources to those communities that have been affected by recent wildfires. Below are the allocations for disaster-impacted communities:
  • $518,000 for counties of Los Angeles, Mendocino, Napa, Orange, San Diego, Solano, Tuolumne and Ventura for property tax losses from the 2018–19 wildfires;
  • $25 million for local governments impacted by recent disasters;
  • $15 million for disaster-impacted counties;
  • $800,000 for the Town of Paradise for environmental document preparation;
  • $10 million to support communities recovering from the Camp Fire; and
  • $2 million for Butte County Fire Department to replace the Butte Conservation Camp.  
Safe and Affordable Drinking Water Fund
Starting next year, funding from the GGRF will be allocated for water system improvements in California, specifically in disadvantaged communities whose residents are being exposed to unsafe drinking water. The deal struck in the budget includes in the first year, $100 million from the GGRF, $30 million from the General Fund.  An additional $3.4 million will be allocated from the General Fund for the State Water Resources Control Board for administrative costs and a fund the framework through 2030. 
 
After the first year, a forthcoming trailer bill will provide further details that include a 5 percent continuous appropriation of total GGRF funds to fund the safe drinking water fund, up to $130 million a year, combined with a General Fund backstop, should the GGRF fund decline. The general fund backstop for these funds will begin in 2023–24 and end in 2030. This trailer bill will also establish the safe drinking water fund and how those funds will be allocated. 
 
Cap-and-Trade Funds
After marathon joint budget conference committee hearings, an agreement was reached on how to allocate a total of $1.4 billion in discretionary spending from cap-and-trade revenues in the budget. This year, the League, along with a large coalition of environmental, waste industry and local government associations, advocated for $100 million from the GGRF for organic waste diversion programs. Unfortunately, this budget request was not included in the final budget, but this program did receive $25 million, which is a step in the right direction. The investments from the GGRF include:
  • $275 million for air toxic and criteria air pollutants;
  • $485 million for low carbon transportation;
  • $127 million for climate smart agriculture;
  • $220 million for healthy forests;
  • $26 million for short-lived climate pollutants, including $25 million for organic waste diversion programs;
  • $109 million for integrated climate action: mitigation and resilience, including $60 million for transformative climate communities and $30 million for urban greening;
  • $10 million for climate and clean energy research and technical assistance to disadvantaged communities;
  • $35 million for workforce training; and
  • $100 million for safe drinking water.  
Water
Included in this year’s budget is funding for various programs to help address issues with water throughout California, including providing funding for drinking water for areas affected by disasters. The investments in water are outlined below:
  • $7.8 million in 2019–20 and approximately $2 million in 2020–21 and 2021–22, $1.7 million in 2022–23, and $2.2 million annually thereafter to implement recent water conservation bills, AB 1668 (Friedman, 2018) and SB 606 (Hertzberg, 2018);
  • $92 million to implement multi-benefit flood improvement projects;
  • $25 million to implement multi-benefit urban flood risk reduction improvement projects;
  • $9.25 million for research to improve observations, forecasts, and decisions support of atmospheric river precipitation events at the Department of Water Resources;
  • $1 million for interim water storage tanks, hauled water, and permanent well replacements/repair;
  • $2 million to cover planning costs for recovery from 2017 and 2018 wildfires;
  • $10 million for the State Water Resources Control Board to provide emergency funding to water and wastewater service providers serving disadvantaged communities; and
  • $2.5 million to continue funding for the placement and filling of temporary water tanks for households that have lost their water supply because of a dry well.  
Community Services
 
In January, the Governor announced a “parent’s agenda” that placed an emphasis on early childcare and education. In addition to significant investments in childcare and education, this year’s budget also includes several major investments to mental health, aging and homelessness. The investments are outlined below:
  • $5 million for the Board of State Community Correction’s youth reinvestment grant program;
  • $46.3 million for the Office of Statewide Health Planning and Development’s mental health workforce development program; and
  • $17.5 million annually for the Department of Aging’s Senior Nutrition Program, with a sunset on Dec. 31, 2021.  
Early Childhood Education
The budget funds major new investments in childcare and state preschool, including adding 10,000 new full-day slots. Significant one-time investments in workforce development and facilities for building the capacity of early care and learning systems are also included in the budget. Some investments in early childhood education are below:
  • $300 million for the Full-Day Kindergarten Facilities grant program;
  • $31.4 million in 2019–20 and $125 million in 2020–21 for 10,000 Full-Day State Preschool slots for non-local education agencies beginning April 1, 2020;
    • The budget also adopts language to expand eligibility for the State Preschool program to include all families that live in a school area where 80 percent or more students qualify for free or reduced price meals; and
  • $245 million in non-Proposition 98 funds for the Early Learning and Care Infrastructure Grant Program.  
Homelessness
California is grappling with how to deal with its homelessness crisis in a number of ways. As outlined previously, the budget includes $650 million in direct funding for cities to address homelessness. Additionally, the budget also includes several other appropriations that help address the challenges homelessness has on our local communities. The investments are outlined below:
  • $5 million for providing shelter, food and basic veterinarian services for the pets of individuals in homeless shelters;
  • $5 million for counties to support housing navigators to help young adults aged 18 years and up to 21 years secure and maintain housing, with priority given to young adults formerly in the foster care system; and
  • $8 million allocated to counties for housing stability to help young adults aged 18 to 25 years secure and maintain housing, with priority given to young adults formerly in the foster care system and probation.  
Transportation, Communication, and Public Works
 
Transportation Funding and Housing Production
Assembly Budget Committee Chair Phil Ting (D-San Francisco), publicly stated that the Governor and legislative “leaders are still negotiating how best to incentivize housing production, but [that] the final deal will not include linking cities’ and counties’ SB 1 money to housing production.”
 
The League opposed the Governor’s and Legislature’s early proposals attempting to link city and county SB 1 funding to housing production. Given the amount of work it required to craft a proposal, muster super-majority support in the Legislature, garner the former Administration’s support and defeat a ballot measure that would have eliminated the funding, it is reassuring to see that this concept has been taken off the table. The League is committed to working with the Administration and the Legislature to find meaningful and comprehensive solutions to address California’s housing crisis that leverages local, state and federal collaboration.
 
Caltrans Funding
The 2019–2020 Floor Report of the State Budget details $2 billion for Caltrans from the Road Maintenance and Rehabilitation Account for local and capital funding for SB 1 transportation projects. The budget adopts $1.9 billion for the Capital Outlay Support program, including funding for up to 8,888 full­time positions at Caltrans and 1,038 positions for contracting out for architectural and engineering (A&E) services. The budget also approves the following appropriations/actions:
  • $85.5 million for project initiation documents for 429 position and 20 full-time A&E contracting services;
  • $236 million to loan repayment;
  • $873 million repayment of loaned weight fees paid down in 2019–20 instead of 2020–21;
  • Technical closure of seven transportation-related funds and intra-schedule transfers;
  • Abolishes the Local Transportation Loan Account and the Transportation Deferred Investment Fund;
  • $828,000 in State Highway Account funds and 10 positions for the Office of Inspector General (OIG), while transferring Caltrans existing audit programs to the OIG;
  • $5 million for suicide prevention on the San Diego-Coronado Bridge;
  • $5.5 million for sound wall construction along the Foothill Freeway; and
  • $1 million for AC Transit services for Oakland Unified School District students.  
California State Transportation Agency (CalSTA)
  • $10.8 million for the dissolution of the North Coast Rail Authority, including operations, maintenance and outstanding debts, which also includes $2 million for Sonoma-Marin Area Rail Transit for safety upgrades and maintenance;
  • $3 million from the Public Transportation Account for CalSTA to conduct an assessment of the North Coast Railroad Authority for dissolving the authority, its assets, and liabilities; and
  • $34.7 million for the Office of Traffic Safety for 2019–20.  
High-Speed Rail 
The budget approved the following appropriations/actions for the High-Speed Rail Authority (HSRA):
  • $4.5 million from Prop. 1A and 35 permanent positions to shift certain administrative and contract management responsibilities;
  • $2.2 million, $1.53 million, and five permanent positions from Proposition 1A on an ongoing basis to improve the HSRA information technology (IT) security program; and
  • $2.2 million from Prop. 1A to enhance IT operational capabilities and acquire licensing and maintenance agreements to support “cloud” infrastructure.  
DMV Capital Outlay Projects
The budget approved the following appropriations/actions for the California Department of Motor Vehicles:
  • $15 million Inglewood Field Office Replacement Reversion;
  • $9.9 million perimeter security fences reversion;
  • $1.2 million Reedly Field Office replacement;
  • $1 million Walnut Creek Field Office relocation (lease); and
  • $1 million General Fund for highest priority deferred maintenance projects to address $17 million backlog.  
CHP Capital Outlay Projects
The budget approved the following appropriations/actions for the California Highway Patrol:
  • $48.7 million Hayward Office Replacement;
  • $41.9 million El Centro Area Office Replacement; and
  • $42 million San Bernardino Office Replacement.  
High-Occupancy Vehicle Lanes Income Verification
  • $3 million for eight positions and $2 million for contractors to perform income verification in 2019–20, $3.5 million for 10 positions and $2.3 million for 2020–21 and 2021–22, $4.5 million for 12 positions and $3 million for 2022–23; and
  • $461,440 for four positions in 2023–24.  
Public Safety
 
Department of Corrections and Rehabilitation (CDCR)
Includes total funding of $12.8 billion, consistent with the May Revision. $12.5 billion in General Fund and $305 million in other funds for CDCR in 2019–20 to provide:
  • $5 million for the California Reentry and Enrichment Grant Program, to provide grants to community-based organizations that provide rehabilitative services to incarcerated individuals;
  • $71.3 million to implement an integrated substance use disorder treatment program pilot at CDCR prisons. The proposal includes:
    • The use of medication assisted treatment to treat inmates with opioid and alcohol use disorders;
    • A redesign of the current cognitive behavioral treatment curriculum; and
    • The development and management of inmate treatment plans and substance use disorder-specific prerelease transition planning.
  • $12.6 million for Substance Use Disorder Response Navigator activities through grants to local health jurisdictions and community-based organizations for the purpose of supporting syringe exchange and disposal program activities, including treatment navigators;
  • $5.5 million for a package of programs aimed at improving literacy rates of incarcerated individuals, including diagnostic remedial reading programs, literacy coaches, computer-based learning, English as a second language courses, literacy mentor programs, and teacher mentor programs;
  • $3.5 billion in General Fund to health care services programs (an increase of roughly $200 million from the January Budget proposal), which provide access to mental health, medical and dental care for inmates; and
  • Funds $27.9 million to pay for increased staffing levels for health care operations throughout California’s prison system. This funding allocation is based on an updated assessment of CDCR’s Medical Classification Model, which concluded that current staffing ratios are insufficient to address the state’s prison population; a population that has grown older, sicker and is experiencing an increase in trauma-related incidents.  
Juvenile Justice
Moves the Division of Juvenile Justice from CDCR to the Health and Human Services Agency and creates a committee within the Child Welfare Council to provide recommendations on juvenile justice policies that will improve youth outcomes and reduce recidivism. Provides $1.2 million ongoing General Fund for key staff to plan the transition and to launch a new independent training institute that will train all staff on best practices. Also provides $1.4 million ongoing General Fund to create a partnership between the Division of Juvenile Justice and the California Conservation Corps to develop and implement an apprenticeship program.
 
The finalized budget includes:
  • $667,000 for CDCR’s Division of Juvenile Justice to meet any matching requirements for California Volunteers grant funding;
  • $8 million for CDCR’s Division of Juvenile Justice for therapeutic communities established within Division of Juvenile Justice facilities.  All programming will be determined by best practices, be trauma informed, be culturally appropriate, and build healthy family connections;
  • $11.95 million to specified cities and counties for various corrections planning and grant programs; and
  • $30 million for the California Violence Intervention and Prevention Grant Program for grants to eligible cities and community based organizations that provide services such as community education, diversion programs, outreach to at-risk transitional age youth and violence reduction models, including:
    • $29 million in competitive grants to all other cities or community-based organizations.
      • Of this $29 million appropriated, $3,000,000 will be for competitive grants to cities with populations of 40,000 or less, defined as a “rural area.”  
Victim Services
Over the coming year, the Administration will develop a plan to consolidate Cal OES and Victim Compensation Board victims programs within a new state department under the Government Operations Agency, and may identify victims programs in other departments that could also be consolidated.
 
The finalized budget includes:
  • $15 million for the Nonprofit Security grant program, to assist nonprofit organizations that have historically been targets of hate-motivated violence, such as places of worship;
  • $10 million in grants related to services for victims of human trafficking; and
  • $34.9 million for support of California Victim Compensation Board, for support services payable from the restitution fund.  
Local Public Safety
The finalized budget includes:
  • $2 million for local law enforcement grants to ensure that a law enforcement agency submits sexual assault forensic evidence to a crime lab;
  • $3 million for grants to local law enforcement agencies, payable from the Alcohol Beverage Control Fund;
  • $3 million to establish a Gun Violence Reduction Pilot Program to support local law enforcement agencies in the counties of Ventura, San Diego, Alameda and Santa Cruz in conducting activities related to seizing weapons and ammunitions from persons who are prohibited from possessing them;
  • $6.2 million ongoing General Fund for the Standards and Training for Corrections Program, which assists local corrections agencies in improving the professional competence of their staff;
  • $112.8 million General Fund for the Community Corrections Performance Incentive Grant, which was created to provide incentives for counties to reduce the number of felony probationers sent to state prison;
  • $14.8 million General Fund for county probation departments to supervise the temporary increase in the average daily population of offenders on Post Release Community Supervision;
  • $3.75 million total General Fund to the cities of Newark, Fremont, Milpitas, San Jose and Santa Clara to address auto break ins; and
  • $1.2 million General Fund for public safety mitigation efforts for the cities of Baldwin Park, Azusa, West Covina and South El Monte.  
Office of Emergency Services
  • Provides an additional $152.3 million to improve the state’s emergency response and preparedness capabilities including the following:
    • $60 million General Fund to be deposited into the State Emergency Telephone Number Account (SETNA) to continue improving the 9-1-1 system, specifically to upgrade the California Public Safety Microwave Network from an analog system to a digital system;
    • $1 million to SETNA to support the implementation and ongoing workload associated with emergency communications coordination and First Responder Network Authority broadband network services; and
    • $16.3 million General Fund to finish the build out of the California Early Earthquake Warning System.  
Cannabis Tax Fund Allocation
The state budget requires the Administration to consider moving cannabis enforcement activities and associated resources from the Department of Consumer Affairs’ Division of Investigation to the Bureau of Cannabis Control beginning in fiscal year 2020–21. This change would do the following:
  • Re-appropriate $10 million in equity funding;
  • Adopt $15 million to provide grants to local governments to assist in the creation and administration of equity programs, and to support equitable access to the regulated market for individuals through financial and technical assistance. The Governor’s Office of Business and Economic Development will administer the grant program on behalf of the Bureau of Cannabis Control; and
  • Adopt trailer bill language to address provisional licenses, clean-up the California Cannabis Appeals Panel statute, enhance equity grants, strengthen administrative penalties against unlicensed activity, extend the CEQA exemption and provide contracting authority for the Department of Health Care Services to administer their Cannabis Tax Fund grant program. 
Statewide Issues and Various Departments
 
California Public Employee Retirement System (CalPERS) and Retiree Healthcare (OPEB)
The state’s total unfunded CalPERS liability is $58.7 billion of an approximately $153 billion unfunded liability. The budget funds over $4 billion of supplemental payments to reduce the state government’s CalPERS and CalSTRS pension liabilities during the multi-year budget window. This includes $2.6 billion in 2018–19, $235 million in 2020–21, and $165 million in 2021–22 supplemental pension payment to address the CalPERS state plans unfunded liability.
 
2020 Census
The budget provides a comprehensive Census outreach effort including:
  • $50 million for Census activities. A majority of this allocation will be distributed to counties who have the highest hard-to-count population, minority population outreach, public private partnerships and the creation of complete count committees across the state.
  • $30 million for additional activities, of which $2 million is for local educational agency-focused strategies for Census outreach, and the remaining for purposes including, but not limited to: language access, efforts by local governments and community-based organizations.  
Office of Digital Innovation
Approves $10 million and 50 positions for the Office of Digital Innovation. This action also included language to establish this new office. The new office will have the authority to develop and enforce requirements for state departments to assess their service delivery models and underlying business processes.
 
Property Tax Forecast
Preliminary data shows statewide property tax revenues increased 6.1 percent in 2018–19 and is expected to grow 6.5 percent in 2019–20.
 
Wayfair v. South Dakota
The U.S. Supreme Court’s ruling in Wayfair v. South Dakota in June 2018 provides states more authority to require out-of-state sellers to collect use tax. AB 147 (Burke), signed this year, clarified the economic nexus thresholds that California will use to determine if out-of-state retailers are required to remit use tax to California, effective April 1, 2019. Marketplace facilitators will now collect and remit sales and use tax on behalf of their marketplace sellers, effective Oct. 1, 2019.
 
Menstrual Products and Diapers Sales Tax Exemption
Temporarily ends the sales tax on diapers and menstrual products for two years. This exemption reduces General Fund revenues by $17.5 million in 2019–20 and $35 million each year thereafter.
 
Paid Family Leave
The budget adopts the Governor’s proposal to expand the duration of Paid Family Leave benefits from six weeks to eight weeks, beginning July 1, 2020, and notes legislative intent to move toward the goal of providing a 90 percent wage replacement rate for low-wage workers using these benefits.
 
County Voting Systems
Approves $87.3 million General Fund to help fund the replacement of county voting systems.
 
Next Steps
 
The FY 2019-20 State Budget was passed by the Legislature on June 13 and is headed to the Governor’s desk for approval. The Governor has until July 1 to sign the budget. Typically, most of the budget trailer bills will be signed at the same time as the budget. The League will continue to update our membership as the budget trailer bills are finalized and adopted by the Legislature.


 
© League of California Cities