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Governor Newsom’s proposed 2021-22 State Budget prioritizes funding to support COVID-19 recovery effort, but lacks significant fiscal support for cities

January 8, 2021
Gov. Gavin Newsom unveiled Friday a record-breaking $227.2 billion budget proposal for the 2021-22 fiscal year. 
(updated on Jan. 13, 2021)
The proposed budget includes a $164.5 billion General Fund and projects $34 billion in total reserves and surplus. The budget significantly restores the state’s rainy day fund, and economic support reserves that were diminished last year. A surplus of $15 billion, largely in one-time funds, are available for spending to address COVID-19 and support resilience and recovery. During his press conference, the Governor said his budget proposal focused on the “most urgent needs” of Californians, including vaccinations, the safe reopening of schools, support for small businesses, money in the pockets of Californians, and wildfire preparedness. 
The budget features the highest investment ever in public schools, $4.5 billion to accelerate recovery and job creation in the state and $370 million to expedite the delivery of COVID-19 vaccinations. The budget also includes $1 billion to reduce wildfire risk and improve forest health, signaling continued focus on managing the state’s growing wildfire threats amid the coronavirus pandemic and its economic fallout.
As part of his budget, the Governor is asking lawmakers to approve a roughly $5 billion “early action” proposal, which includes $2.4 billion to send $600 payments to low-income families, $2 billion to reopen schools, and nearly $650 million in grants for businesses impacted by the pandemic.
Read Cal Cities Executive Director and CEO Carolyn Coleman’s statement in response to the budget proposal, and Cal Cities’ analysis of the budget below.
Housing, Community and Economic Development
  • Proposes to extend the evictions moratorium by an unspecified date to provide additional time to expend the $2.6 billion in federal aid to assist low-income renters.
  • Creates a new Housing Accountability Unit within the Department of Housing and Community Development (HCD) to provide technical assistance, monitor cities land use practices, and enforce existing housing laws. Provides $4.3 million for technical assistance. 
  • $2 million to the Department of Fair Employment and Housing to conduct education campaigns, housing surveys, and prosecute violations of California's fair housing laws.
  • $500 million to the Infill Infrastructure Grant Program, which provides grants to local governments and developers to spur housing construction.
  • $500 million to the Low-Income Tax Credit Program, which helps fund affordable housing projects.
  • $8.5 million to the California Workforce Development Board to expand state-approved construction apprenticeships.
  • $2.7 million to HCD to implement AB 434 (Daly, Statutes of 2020), which streamlines multiple housing programs into one application.
  • $750 million to expand Homekey, which provides grants to local governments to acquire and rehabilitate housing, including hotels and motels, to convert them into interim or long-term housing.
  • $750 million, over three years, to the Department of Health Care Services to provide grants to counties for behavioral health treatment resources.
  • $250 million to the Department of Social Services for acquisition and rehabilitation of Adult Residential Facilities and Residential Care Facilities to expand housing for low-income seniors.
Environmental Quality
  • $1.3 billion Cap-and-Trade expenditure plan that includes funding for safe drinking water, electric vehicle deployment, community air quality protection, and forest health management.
  • $1 billion to support the Forest Management Task Force's Wildfire and Forest Resiliency Action Plan, including:
    • $323 million for proposed early action to accelerate fire prevention projects.
    • $50 million for the Climate Catalyst Fund within the California Infrastructure and Economic Development Bank to support climate smart agriculture loans to advance climate change-related projects including methane reduction and circular economy projects. 
    • Funding for forest health, urban forestry, fire prevention grants, and home hardening programs.
  • $256 million to the California Office of Emergency Services to fund the California Disaster Assistance Account. These funds assist local governments to serve their communities in the wake of emergency events.
  • $5 million to expand pilot programs to increase consumer redemption in communities underserved by recycling centers.
 Revenue and Taxation  
  • $2.4 billion for an additional $600 state payment to low-income workers, which may have downstream positive effects on local revenue from increased consumer spending.
  • $575 million for small businesses and non-profit grants.
  • Proposes significant tax credits/exclusions that may impact local sales and property tax revenues, including those for advanced energy projects and zero-emission vehicle charging stations.
 Transportation, Communications, and Public Works
  • $2.4 billion for the State Transportation Improvement Program, which provides funding for future multimodal transportation improvements.
  • $1.5 billion for infrastructure and incentives to support the implementation of the state's zero-emission targets, with $1 billion in future revenues for electric vehicle charging and hydrogen fueling stations, and $465 million in Cap-and-Trade funding to improve access to new and used zero-emission vehicles.
  • Forecasts fuel excise tax revenues are expected to be lower than pre-pandemic forecasts by a total of $1.5 billion through 2024-25.
  • $1.3 billion to support transit and rail, including $667 million in State Transit Assistance,
  • $1 billion to address traffic congestion, $900 million to provide projects that support walking and biking and $800 million for partnerships with local transportation agencies.
  • $487 million for Transit and Intercity Rail Capital Program, and $107 million for the Low Carbon Transit Operations Program.
  • $353.9 million over the next five years for broadband infrastructure improvements and systemwide technology investments.
  • $52 billion in state infrastructure investments.
 Governance, Transparency and Labor Relations
  • $14.4 million and 70 positions for the Division of Occupational Safety and Health to hire additional workplace safety inspectors.
  • $8.6 million and 43 positions to enforce recently enacted legislation to enhance workers' compensation access for public safety and healthcare workers.
  • $5.5 billion one time for the statutorily required pension contributions on behalf of the state and an additional $1.5 billion to reduce the state's unfunded liability.
    • There is no proposal or funding proposed to assist public agencies with their pension or retiree health care costs.
 Public Safety
  • Significant investments to enhance the Department of Forestry and Fire Protection's fire prevention and suppression capacity:
    • $2.9 billion for 8,735.1 positions
    • $143.3 million for additional fire crews
    • $48.4 million to support the phasing in of new firefighting aircrafts
  • $323 million for early action in the spring to accelerate wildfire prevention projects before next fire season.
  • $153.8 million in the Cannabis Control Fund to reflect the consolidation of the functions and positions of the Bureau of Cannabis Control, the Department of Food and Agriculture, and the Department of Public Health into a new stand-alone Department of Cannabis Control within the Business, Consumer Services, and Housing Agency on July 1, 2021.
  • Increases Proposition 64 allocation by $146.2 million, with an estimated $443.1 million available for youth education, prevention, early investment, treatment, environmental impacts of illegal cannabis cultivation, and other public safety-related activities.
  • $72.2 million in ongoing General Fund dollars, an increase of 3.7 percent from the 2020 Budget Act, to assist courts in continuing to provide fair and timely access to justice during COVID-19.
  • $13.5 million ongoing to the Department of Justice to create three teams to investigate officer-involved shootings that result in the death of an unarmed civilian.
  • Proposes closing a second state-operated prison in 2022-23. California Department of Corrections and Rehabilitation is already planning to close Deuel Vocational Institution (Tracy, CA) by Sept. 2021, achieving savings of $113.5 million General Fund in 2021-22, and $150.6 million General Fund beginning in 2022-23.
 Community Services
  • $3.1 billion in local assistance funding for various child care programs.
  • $82 million to support the 'Parks for All' initiative.
  • $25 million to continue the Great Plates Delivered senior meals program.
  • $5 million to implement the Master Plan for Aging in 2021.
  • $5 million to provide grants to local libraries to support early learning and after-school programs.
  • $1 million to support the online purchase and delivery of library books through the Zip Books program.
Read more about proposed investments in the budget for climate resiliency, although with limited direct funding for cities.

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