Yesterday, the California State Senate and Assembly passed the State Budget on a party-line vote, meeting the Constitutional deadline to pass a balanced budget annually by June 15.
Much of the deliberations were affected by the COVID-19 pandemic; funding for various state programs and initiatives became scarcer in light of the economic downturn driven by the state’s pandemic response. While the state entered the year in a particularly strong financial position with a projected budget surplus in the billions, the state now faces an anticipated budget shortfall of approximately $54 billion. This necessitated wide-range cuts to various budget proposals and other strategies to pass a budget reflecting this reversal in the state’s financial position.
The budget bill, SB 74, includes expenditures of $153.1 billion in General Fund expenditures (the total expenditures from all funds is proposed to be $222.2 billion). Despite the downturn, the state budget included newly implemented or expanded programs as well as miscellaneous line-item appropriations in addition to budget cuts.
Over the past year, CSDA has actively advocated for additional local government funding to help mitigate impacts of planned power shut off events and for special district eligibility for that funding. The budget passed by the Legislature includes $50 million (one time) from the General Fund for Community Power Resiliency funding to support state or local costs related to preparing for and responding to power shutoff events, such as purchasing generators for state facilities, providing grants to local governments to help them plan for shutoff events, and helping local governments or food banks secure backup power for key facilities. The control language for this item specifies special district eligibility for districts who operate or maintain identified critical facilities or provide critical infrastructure pursuant to the de-energization guidelines adopted by the Public Utilities Commission. Additionally, to access the grant funding they must demonstrate they are planning for power outage events. The control language allows for this requirement to be met in one of two ways: 1, submitting an emergency plan to the California Office of Emergency Services (CalOES) if it contains provisions relating to planned Public Safety Power Shut-offs (PSPS) events, or 2. if the plan does not speak to PSPS events, submitting an attestation that power outage planning will be included in their emergency plan. CSDA is working with local government partners, budget staff, and CalOES to provide clarity for this language prior to implementation. Furthermore, the budget passed yesterday accepted the Governor’s proposal to augment California Disaster Assistance Act funding to a total of $100.8 million.
The Governor’s budget proposal reverted $7.3 million in second-year funding to the Paradise Irrigation District (PID) that was approved in last year’s budget appropriation and diverted it as a way to fill the state budget gap; CSDA successfully joined efforts in a broad coalition to restore that essential funding to PID, and the budget passed by the Legislature rejected the Governor’s proposal and keeps PID funding intact.
The budget allocates $197.3 million in Proposition 68 funds (the California Drought, Water, Parks, Climate, Coastal Protection, and Outdoor Access for All Act of 2018) for local assistance grants, as well as an additional $8.8 million in Proposition 84 funds (the Safe Drinking Water, Water Quality and Supply, Flood Control, River and Coastal Protection Act of 2006) for the same purpose. The budget cuts funding for grants from the State Water Efficiency and Enhancement Program. Similarly, the budget cuts funding for local assistance grants to those affected by the Sustainable Ground Water Management Act (SGMA) but retains approximately $9.6 million in funding for the implementation of SGMA.
The budget also adopts trailer bill language to temporarily hold harmless transit operators that receive state funding and whose ridership levels have been negatively affected by COVID-19 and eliminates financial penalties for non-compliance with transit funding efficiency measures in the Transportation Development Act and the State Transit Assistance Program.
While CSDA was supportive of the Governor’s January budget proposal to pursue a Climate Resiliency Bond, with the budgetary challenges presented by COVID-19 impacts, the Governor withdrew his $4.8 billion Climate Bond proposal. The budget passed by the Legislature is consistent with this withdrawal, though efforts to pass a similar climate bond continue in both the Senate and Assembly.
California's Greenhouse Gas Cap-and-Trade Program which, among other things, funds the Safe and Affordable Drinking Water Act, a recently enacted program to help fund improved water systems in disadvantaged communities has recently suffered diminished revenue due to the recent crisis and had a dramatically low auction for carbon credits in the most recent auction. The budget “deferred action” on the $965 million Cap and Trade Expenditure plan proposed by the Governor which had prioritized Air Quality in Disadvantaged Communities, Forest Health and Fire Prevention, and Safe and Affordable Drinking Water. Instead, the budget that was passed contemplates only funding many of the State Air Resources Board administrative costs and appropriates money for the Board to make changes to the Cap and Trade Program itself. This issue will likely be resolved in forthcoming budget trailer bill legislation.
Other expected forthcoming budget items include legislation to offer competitive funding for providers to extend broadband to underserved areas and another to provide new guidance on how to calculate and distribute funds derived from excess Education Revenue Augmentation Fund (ERAF) contributions.
While the Legislature has now fulfilled its Constitutional duty to pass a budget by June 15, additional work remains. The budget includes significant assumptions of federal relief dollars that have yet to be realized. Should the funds not become available by October 1, significant cuts to the budget will be triggered. Those triggered cuts remain to be negotiated. The budget that was passed represents an agreement between the Senate and the Assembly, but has not yet been agreed to by Governor Newsom. In passing the budget, lawmakers noted that they will continue to negotiate with the Governor and other stakeholders and much work remains before they adjourn for the year at the end of August. CSDA will continue to monitor these developments as they arise and keep its members informed. Be sure to subscribe to the Advocacy News Blog to receive updates and stay up-to-date with the most timely information.
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