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Gov. Gavin Newsom's revised May budget proposal includes big wins for cities and Californians, but the devil will be in the details released later this month

May 14, 2021
​The Governor announced a record-breaking $267.8 billion revised May budget proposal on Friday, $40 billion higher than the one he proposed four months ago.
 
Repeatedly touting the budget as "historic" and "without precedent," Newsom noted, "We are trying to do things the state has talked about but never been able to accomplish because we've never had the resources to do it." The revised budget proposal included a number of one-time investments thanks to a record $75 billion state surplus, as well as an additional $26 billion in federal relief from the American Rescue Plan. The historic state budget surplus is driven by robust personal income, and corporation and capital gains tax revenues. State sales tax revenues remain strong.
 
The revised budget plan includes stimulus checks for most Californians, an expansion of small business grants and tax credits, $20 billion in public education investments, $11 billion in transportation systems, $7 billion for broadband deployment, and $5.1 billion in drought support.
 
Perhaps most notably, the Governor announced earlier this week the revised budget would include $12 billion for additional services and support for Californians experiencing homelessness, an announcement the League of California Cities responded to with a statement by Cal Cities Executive Director and CEO Carolyn Coleman.
 
Cal Cities has developed an analysis of the Governor’s revised 2021-22 State Budget below, highlighting the budget components that most impact cities.
 
Cal Cities will work with the Administration and the Legislature in the coming weeks on budget trailer bills and the funding distribution details, and will continue to urge the State to prioritize investments that ensure a safe, equitable, and expedited recovery at the local and state level.
 
Read Executive Director Coleman’s statement in response to the budget proposal.
 
Housing and Homelessness
 
The Governor's May Revision contains historic levels of funding to address the housing and homelessness crisis gripping many regions of the state. He has also established a goal of ending family homelessness over the next five years. While these investments are significant and badly needed, the allocation and implementation information is not available at this time. These critical details will be released in the coming weeks, in the form of budget trailer bills. Below is a breakdown of the major allocations.
 
Housing
  • Rent Relief Program — $5.2 billion in federal rental relief aid from the American Rescue Plan Act of 2021 (ARPA) for both state and local entitlement jurisdictions.
  • Expanded Homeowner and Renter Legal Assistance — $20 million in ARPA over the next three years ($60 million total) to the Judicial Council to continue providing legal assistance grants to over 100 legal service and self-help organizations.
  • California Department of Housing and Community Development (HCD) — $1.75 billion one-time federal ARPA funds to support HCD affordable housing projects. It is estimated that this will help more than 6,300 units of shovel-ready affordable housing move forward in an expedited manner.
  • Accessory Dwelling Unit Financing — $81 million one-time federal ARPA funds to expand California Housing Finance Agency's (CalHFA) accessory dwelling unit (ADU) program; this will inject a total of $100 million in available financing for ADUs.
  • Housing Development on State Excess Sites — $45 million in one-time federal ARPA funds that would assist excess state land development by providing funding for vital infrastructure.
  • Promoting Homeownership — $100 million one-time federal ARPA funds to CalHFA to expand its First Time Homebuyer Assistance Program, which helps first-time homebuyers with making a down payment, securing a loan, and paying closing costs on a home.
  • Regional Early Action Planning Program (REAP) — $500 million one-time federal ARPA funds for HCD to provide additional planning and implementation grants to regional entities for infill developments, targeted towards the state's climate goals and reducing vehicle miles traveled.
  • Housing Preservation — $300 million one-time federal ARPA funds to sustain HCD legacy projects affordability requirements.
  • Construction Apprenticeships — $20 million one-time General Fund to connect job seekers to housing apprenticeship opportunities, in partnership with the University of California, California Conservation Corps, state and local workforce development boards, philanthropic organizations, and the building industry.
  • Repairing and Maintaining Seasonal Farmworker Rental Housing — $20 million one-time General Fund for critical deferred maintenance needs and improved habitability at the Office of Migrant Services (OMS) centers.
Homelessness
  • Homekey — $7 billion over two years to further expand the portfolio of housing, including behavioral health continuum infrastructure and housing for low-income seniors. Of this amount, $1 billion would specifically target families experiencing homelessness or at risk for being homeless.
  • Challenge Grants and Technical Assistance — $40 million one-time General Fund available over five years for the Homeless Coordinating Financing Council to provide grants and technical assistance to local jurisdictions to develop action plans to address family homelessness.
  • Department of Development Services Homelessness Supports — $475 million General Fund in both 2021-22 and 2022-23 to expand the existing CalWORKs Housing Support program. This program assists CalWORKs families experiencing homelessness to secure and maintain permanent housing; services include financial assistance and housing-related wrap-around supportive service.
  • Bringing Families Home Program — $280 million General Fund in both 2021-22 and 2022-23 to expand the existing Bringing Families Home program. This program provides housing-related supports to eligible families experiencing homelessness in the child welfare system.
  • Project Roomkey — $150 million one-time General Fund to support transitioning participants into permanent housing.
  • Regional Center Mobile Crisis Teams — $8 million General Fund in 2021-22, increasing to $11 million General Fund ongoing in 2022-23, for Systemic, Therapeutic, Assessment, Resources, and Treatment (START) teams. The teams provide 24-hour crisis prevention and response services to individuals with intellectual or developmental disabilities.
  • Housing and Disability Advocacy Program — $175 million General Fund annually through 2023-24 to assist disabled individuals who are experiencing homelessness.
  • Non-Congregate Shelters — $150 million one-time General Fund to support the stability of the state's Federal Emergency Management Agency-funded non-congregate shelter population and transition of individuals from Project Roomkey into permanent housing following the September 2021 sunset of the federal reimbursement availability from the pandemic.
  • Housing and Disability Advocacy Program — $175 million General Fund annually through 2023-24 to better reach and house individuals who are eligible for but not currently receiving Supplemental Security Income/State Supplementary Payment through benefits advocacy and housing assistance.
  • Home Safe — $100 million General Fund annually through 2022-23 for the Home Safe program to provide access to health, safety, and housing supports for individuals involved in or at risk of involvement in Adult Protective Services.
  • Supportive Services for Formerly Homeless Veterans — $25 million one-time General Fund for the California Department of Veterans Affairs to administer a competitive grant program to support aging veterans and veterans with disabilities who have experienced chronic homelessness.
  • Encampment Resolution Grants — $50 million one-time General Fund for the Homeless Coordinating and Financing Council (HCFC) to partner with local governments and assist them with resolving critical encampments and transitioning individuals into permanent housing.
  • Caltrans Encampment Coordinators — $2.7 million one-time General Fund for Caltrans Encampment Coordinators to mitigate safety risks at encampments on state property and to connect these individuals to services and housing, in coordination with HCFC and local partners.
  • Accountability: Homeless Coordinating and Financing Council — $5.6 million one-time General Fund for HCFC to conduct an assessment of local homelessness service providers and state-funded homelessness programs. The assessment will provide a detailed view of the range of services and strategies utilized at the local level and help determine if state investments are aligned with local homelessness response systems.
Environmental Quality
 
Overall, the May Revision includes $11.8 billion in investments over multiple years to address and reduce the state's multi-faceted climate risks, ranging from water supplies, wildfires, heat, and sea level rise. Of these funds:
  • $5.1 billion for water infrastructure and drought response spread over multiple years, with $3.475 billion being allocated in 2021-22.
  • $2 billion to pay down unpaid utility debt, including water and electricity that has accumulated during the pandemic.
  • Building on the $536 million already appropriated earlier this year, an additional $708 million for a total of $1.24 billion will go to wildfire and emergency response services over two years.
  • $1.3 billion in targeted investments for communities that are facing the impacts of climate change today.
  • $130 million to support a circular economy by funding the development of infrastructure required to process recyclables and manufacture products from recyclable material.
Revenue and Taxation  
 
State Replenishes Reserves
The May Revision includes $24.4 billion in reserves, including:
  • $15.9 billion in the Proposition 2 Budget Stabilization Account (Rainy Day Fund) for fiscal emergencies.
  • $450 million in the Safety Net Reserve.
  • $4.6 billion in the Public School System Stabilization Account.
  • An estimated $3.4 billion in the state's operating reserve.
The May Revision continues to pay down the state's long-term retirement liabilities and reflects $3.4 billion in additional payments required by Prop. 2 in 2021-22, as well as $7.9 billion in additional payments over the next three years. The improved revenue forecast also allows for the elimination of $2 billion in proposed program suspensions that were delayed during the State’s current budget.  
 
Gann Limit State Appropriations Limit Requires Rebates and Education Investments
The State Appropriations Limit, or "Gann Limit," caps the amount of revenues from proceeds of taxes that can be appropriated by the state. This constrains state spending and requires revenues over the two-year limit to be allocated evenly between schools and taxpayer refunds. The May Revision projects that the limit for the 2020-21 and 2021-22 fiscal years will be exceeded by $16.2 billion.
 
The May Revision allocates $16.2 billion to comply with the limit, including tax refunds through a Golden State Stimulus, and allocates half of the funds to K-14 schools in 2022-23. Given the uncertainty around the calculation of the limit in future years, the multi-year projections do not assume additional payments.
 
$12 Billion for Golden State Stimulus Checks
  • $600 payments to all taxpayers who make up to $75,000 a year and did not receive the first payment.
  • Additional $500 in direct payments to families with dependents.
  • Additional $500 in direct payments to undocumented families.
Transportation, Communications, and Public Works
 
The Governor's May Revise budget proposal makes unprecedented investments in broadband deployment to build out the backbone for statewide broadband. These investments will allow local governments to provide service and make broadband more accessible to all Californians. These budget allocations are consistent with Cal Cities’ policy and strategic priorities, which seek to close the digital divide by protecting and modernizing critical infrastructure. The May Revision also bolsters the Governor's commitment to reaching zero-emission targets.

Broadband
  • $7 billion over three years to expand broadband infrastructure, increase affordability, and enhance access to broadband for all Californians.
    • $500 million Loan Loss Reserve Account to assist local governments, tribes, and non-profits to secure private financing for new municipal fiber networks.
    • $500 million of one-time federal ARPA funds to expand broadband and to promote access to affordable telephone services in rural areas that are costlier to serve.
    • One-time federal ARPA funds within the California Advanced Services Fund to incentivize existing and new providers to fund infrastructure for "last mile" service to the state's remaining unserved households.
    • An increase of $35 million available to expand broadband access to isolated and under-served communities through a collaborative partnership of local education agencies, regional libraries, and telehealth providers, as well as leverage available federal funds through the E-Rate Program.
    • An increase of $6 million to support the Broadband Connectivity Initiative through California libraries.
Transportation
  • $11 billion of state investment in the transportation system and related zero-emission vehicle (ZEV) efforts.
    • $500 million for active transportation to advance projects that increase the proportion of trips accomplished by walking and biking, increase the safety and mobility of non-motorized users, advance efforts of regional agencies to achieve greenhouse gas reduction goals, enhance public health, and benefit many types of users, especially those in disadvantaged communities.
    • $1 billion General Fund for transit and rail projects statewide that improve rail and transit connectivity between state and regional local services.
    • $2 billion to support the advancement of priority State Highway Operation and Protection Program (SHOPP) projects, Interregional Transportation Improvement Program (ITIP) projects, and local road and bridge investments.
    • $407 million to purchase or lease clean bus and rail equipment and infrastructure that eliminate fossil fuel emissions and increase intercity rail and intercity bus frequencies.
    • $4.2 billion of Proposition 1A to complete high-speed rail construction in the Central Valley.
    • $500 million to support high priority grade separations and grade crossing improvements.
    • $1.5 billion for a three-year effort to clean up garbage statewide, beautify the state's transportation network, educate the public about the harms of litter, and create long-lasting litter deterrents.
Zero-Emission Vehicles
  • $3.2 billion to build upon the state's zero-emission vehicle goals. This includes funding for clean transportation programs that will improve air quality by expanding zero-emission short-haul trucks, transit buses, and school buses. Funding also supports additional charging and fueling infrastructure to support more clean vehicles.
    • $1.7 billion for trucks, buses, and supporting infrastructure:
      • 1,150 trucks
      • 1,000 transit buses
      • 1,000 school buses
    • $800 million Clean Cars for All and ZEV rebates.
    • $500 million infrastructure.
    • $250 million ZEV manufacturing grants.
Governance, Transparency, and Labor Relations
  • $550 million increase above the amount included in the Governor's January State Budget proposal for the state's contributions to CalPERS for approximately $6 billion in total contributions.
  • $1.9 billion in supplemental Proposition 2 debt repayments to reduce the unfunded liabilities of the state CalPERS plans.
  • There is no proposal or funding proposed to assist public agencies with their pension or retiree health care costs.
 
Public Safety
  • $140 million, and $70 million ongoing, to expand pretrial pilot programs.
  • $13.7 million, and $3 million ongoing, to expand efforts for a pilot for re-envisioning and transforming the state's correctional system, with the goal of achieving greater success in rehabilitating incarcerated individuals and preparing them for life outside of the institution.
  • $34.8 million additional funding to establish a Youth Rehabilitative Offender Community that focuses on providing enhanced rehabilitative services to youth.
  • $9.6 million to facilitate the realignment of youth offenders from the state to counties. Annual appropriations to be allocated to counties to serve realigned youth, including $45.7 million in 2021-22, growing to $211.9 million in 2024-25, and annually thereafter.
  • $3 million over three years to provide support for alternative campus public safety programs.
  • $2.3 million, and $2.1 million ongoing, to provide supportive services to survivors of those killed in officer-involved shootings.
Disaster Preparedness/Prevention
  • $100 million for the Governor's Office of Emergency Services (Cal OES) to strengthen the state's emergency capacity and capabilities.
  • $250 million for Cal OES to implement an equitable all hazards grant program focused on building resiliency in disadvantaged communities.
  • $133.9 million General Fund for Cal OES for the following investments to enhance state and local emergency preparedness and response.
Cannabis
  • $100 million to establish a local jurisdiction assistance grant program for cannabis.
  • $9 million for the new Sustainable California Grown Cannabis pilot program.
  • $629.1 million in Cannabis Tax Fund revenue to be allocated accordingly:
    • 60 percent ($377.5 million) to education, prevention, and treatment of youth substance use disorders and school retention.
    • 20 percent ($125.8 million) to clean-up, remediation, and enforcement of environmental impacts created by illegal cannabis cultivation.
    • 20 percent ($125.8 million) to public safety-related activities.
  • The consolidation of the functions and positions to the Department of Cannabis Control will include:
    • Creating a Deputy Director of Equity and Inclusion to further the Department's mission to implement progressive cannabis policies, as well as to license and regulate commercial cannabis activity in a way that best protects public health, safety, the environment, and local communities throughout the state.
    • Extending the Department's ability to issue new provisional cannabis licenses by six months, to July 1, 2022, and require the Department to promulgate regulations identifying steps that must be taken for provisional licensees to show progress toward achieving annual licensure.
  • Consideration for long-term licensing and regulations will be negotiated in additional trailer bill language to follow.
Community Services
  • $900 million in 2022-23, ramping up to $2.7 billion by 2024-25, for the creation of a "14th grade" of Universal Transitional Kindergarten for all school children.
  • $106 million over three years to strengthen older adults' recovery and resilience from isolation and health impacts caused by the pandemic.
  • $3.3 million in ongoing funds to implement the Department of Aging’s Master Plan for Aging.
  • Adding an additional $256.2 million to support the 'Parks for All' initiative.
  • $507.3 million for the enhancement and restoration of state park facilities statewide.
  • $91 million to the State Library to fund an equity-focused matching grant program that supports local library infrastructure, expands broadband access to isolated and under-served communities, and supports broadband capacity and equipment grants.


 
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