On Friday, May 13, Governor Gavin Newsom released the May Revision to his 2022-23 State Budget Proposal. The release of the summary coincided with a livestream in which Newsom highlighted priorities of the proposed budget heading into the fiscal year and moving forward. Major highlights of the May Revise include a $97.5 billion surplus (nearly $20 billion more than expected in the January Budget proposal), reflecting $37.1 billion in proposed budget reserves and $49.2 billion in discretionary funds, considering roughly half of the surplus is required by law to be spent on Proposition 98 school funding.
At the annual Special Districts Legislative Days conference in Sacramento today, special district leaders advocated for a number of key budget requests, including payment of $870 million in State mandated debt owed to local governments. CSDA, in partnership with other local government organizations, will continue fighting for these budget requests through the Legislature’s June 15 Constitutional deadline to pass a balanced budget.
Below are highlights of the released May Revision:
Healthcare
The May Revision reflects $933 million to provide retention payments for certain workers in hospitals, psychiatric hospitals, and skilled nursing facilities. If employers commit to fully matching, the state will provide a baseline payment and will increase the payment up to $1,500. In addition, the May Revision includes a two-year, $50 million grant program providing technical assistance to small or under-resourced providers to, among others, small physician practices, rural hospitals, and community-based organizations in addition to education and technical assistance for any entities new to the health information exchange.
The May Revision includes $280 million ($132.7 million General Fund) for the Workforce and Quality Incentive Program for payments to skilled nursing facilities that make substantial improvements and meet quality benchmarks building on the average four percent annual increase initially proposed. Furthermore, the May Revision proposes $100 million ($50 million General Fund) to support early childhood-focused efforts with the inclusion of grants focusing on encouraging health care provider integration with other early-childhood-specific programs. Lastly in the healthcare space, the May Revision proposes $100 million for medical surge staffing this fiscal year to allow the California Department of Public Health to support upfront staffing costs until facilities can be invoiced and reimburse the state for costs. The May Revision also includes $40 million in resources for vaccine staff for the release of vaccines to children under five, continued boosters for eligible groups, and increased staffing at pediatric sites.
Workforce Development
To expand campus infrastructure to support the need for a highly skilled, STEM-trained workforce, expand access to a CSU education, and to create a California-based collaborative solutions to climate change, the May Revision includes investments in the San Diego State University, Brawley Center, and the CSU Fullerton Engineering and Computer Science innovation Hub.
Targeting older adults and veterans at California’s local libraries and building upon the Governor’s Budget investment of $8.8 million to support two additional years of free online job training and workforce development programs available through public libraries, the May Revision includes a $1.4 million one-time General Fund. Lastly, the May Revision describes an allocation of $17 million from the 2021 Budget Act to address extreme heat and High Road workforce development in addition to building upon California’s climate-smart workforce through apprenticeships and training partnerships in job and careers that address extreme heat.
Pensions
To further reduce the unfunded liabilities of the CalPERS state plans, the May Revision includes an estimated $2.9 billion in one-time Proposition 2 debt repayment funding in 2022-23. Unknown is the impact that this may have on the total funded status of the CalPERS fund.
Public Works
In providing match funding to supplemental grants that certain projects receive from the federal government and non-profit foundations, the May Revision includes $100 million to support carbon removal projects.
Public Safety
The May Revision proposes $50 million one-time General Fund to fund grants intended to improve the health and well-being of general officers, decrease stress and trauma, improve community trust and relations, and build resiliency. This reflects an initial $5 million one-time General Fund included in the Governor’s Budget for the Commission on Peace Officer Standards and Training to develop a Law Enforcement Wellness Program with grants to be distributed by the Board of State and Community Corrections.
California Arrearage Payment Program
The California Arrearage Payment Program (CAPP), established in the 2021 Budget, directed $1 billion in federal American Rescue Plan Act funding to financial assistance to reduce or eliminate past due energy bill balances accrued by customers impacted by the COVID-19 pandemic. Administered by the Department of Community Services and Development, 1.5 million accounts received CAPP benefits. The May Revision includes $1.2 billion in funding to relieve California households by addressing energy arrearages. In addition, the May Revise includes $200 million for residential wastewater and water arrearages for the Low-Income Household Water Assistance Program (LIHWAP), also administered by the Department of Community Services and Development.
Climate Innovation and Commitment
The May Revision converts two green tax credits proposed in the Governor’s Budget – the innovation Headquarters Credit and Credit for Green Energy Technologies – into a single Climate Innovation Grant program administered by the California Energy Commission. Focusing on research activities that help California reach its climate goals, the grant would be funded at $1.05 billion over four fiscal years - $100 million in 2022-23, $325 million in 2023-24 and 2024-25, and $300 million in 2025-26.
The May Revision includes an additional $9.5 billion over four years for a total $32 billion to continue to advance the state’s Climate and Opportunity Budget, support energy reliability, protect communities, and provide equitable climate solutions. In addition, the May Revision includes an additional $1.3 billion General Fund for drought resilience and response to better assist communities and fish and wildlife in avoiding immediate negative impacts caused by extreme drought. With a commitment to climate innovation and commitment, the May Revise focuses on these specific issue areas:
- Drought: To continue the state’s drought response, the May Revision includes an additional $1.6 billion with $250 million set aside as a contingency in the Governor’s Budget. Furthermore, the May Revision includes $75 million to support grants up to $50,000 to farming and related businesses that have been negatively impacted by the drought. The May Revision also includes an investment of $553 million to provide grants to urban water districts and smaller community water suppliers for drought-relief projects. Additionally, the May Revision includes $280 million to address biodiversity impacts associated with drought and climate change and build water resilience projects to support the implementation of voluntary agreements with water suppliers.
- Wildfires: The May Revision builds on the efforts to enhance and continue building forest and wildfire resilience with additional funding to support expanded fire crews and air attack operations. The Administration plans to continue to work with firefighter associations on additional proposals that would appropriately staff CalFire.
- Extreme Heat: To address extreme heat, the May Revision includes $800 million General Fund over two years including $300 million to support the implementation of the state’s updated Extreme Heat Action Plan. This includes $220 million to support cooling of communities at schools and through resilience centers over two years, $43 million to protect vulnerable populations and ecosystems, $20 million to increase understanding of the risks posed by extreme heat, and $17 million to invest in the alignment of the state’s response to extreme heat and High Road development and California’s climate-smart workforce.
- Water Resiliency: Within the $32 billion investment, the May Revision includes $530 million to support water recycling and groundwater cleanup, advance drinking water and clean water projects that leverage federal infrastructure funds, and continue adequate solar pilots. Also, the May Revision proposes $187 million to support agricultural water conservation practices by incentivizing farmers to install more efficient irrigation equipment, provide on-farm technical assistance, and support additional water conservation projects. The May Revision also includes $500 million General Fund in three years to serve as a multi-year commitment to promote strategic water storage projects that benefit water supply reliability and the environment.
- Pathways to 30x30 Strategy: The 2021 Budget Act committed $1.4 billion General Fund over three years including $768 million General Fund over two years to support the implementation of the state’s Natural and Working Lands Climate Smart Strategy and the Pathways to 30x30 Strategy to accelerate California’s pledge to expand access to nature, tackle climate change, and protect biodiversity. More information about the project can be found here.
Energy
The May Revision proposes to allocate $8 billion over five years to provide consumers with relief from rising electricity rates and increase the state’s energy system reliability. This proposed allocation is in addition to the $2 billion allocated in the Governor’s Budget to provide incentives for industrial grid support and decarbonization projects, renewable hydrogen, and long-duration storage projects. These investments focus on accelerating clean energy projects and innovation, provide relief for taxpayers, and create strategic energy reserves to maintain liability.
Emergency Response
The May Revision reflects a $183.4 million proposal and 50 positions to address the more frequent, complicated, and often simultaneous emergencies and disasters occurring across the state. This proposal includes $29.5 million General Fund one-time to continue COVID-19 testing efforts and provide resources to activate the state’s mutual aid system should future outbreaks happen.
Judicial Council
The May Revision includes $1.2 million General Fund for the Judicial Council to address climate, environmental, and water-related legal disputes in addition to $75 million one-time General Fund to support the California Small Agricultural Business Drought Relief Program to aid eligible agricultural-related businesses effected by severe drought. Some of this funding in this specific package in addition to some of the funding proposed for nature-based solutions will provide habitat restoration supporting voluntary agreements with water users and to improve the health of Northern California Rivers.
Developing Lithium Valley
To support the development of geothermal and lithium extraction facilities in the Salton Sea region and support the economic supply chain hub that includes in-region lithium and batter production, the May Revision proposes to provide $5 million to support these efforts. In addition, the May Revision proposes to provide for local governments and residents to benefit from the development and extraction of lithium by establishing a tax per ton of lithium extraction placing reporting and fee requirements on these activities while providing funding to contribute to the maintenance, restoration, and operations of Salton Sea, and grants to support disadvantaged communities in the region.
Electricity Rates Revisions and the Public Utilities Commission
The May Revision proposes statutory revisions to allow the Public Utilities Commission to adjust electricity rates to predetermined fixed charges with an emphasis on low-income customers. This rate reform effort will reduce charges attached to energy consumed, enable the creation of better price signals to enhance widespread electrification efforts, and help control rate volatility.
Property Tax
Preliminary data suggest that statewide property tax revenues increased around 3.7 percent in 2021-22, which is 2.5 percent points lower than anticipated in the Governor’s Budget. These tax revenues are expected to grow 5.9 percent in 2022-23 due to home price growth slowing and data that shows a much lower rate of property transfers in 2021 compared to recent years. Approximately 42 percent ($39.6 billion) of property tax revenues this fiscal year will go to K-14 schools. This includes $2.8 billion that schools are expected to receive in 2022-23 pursuant to the dissolution of redevelopment agencies.
State Appropriations Limit Calculation
The 2022-23 limit is estimated to be $135.6 billion pursuant to Article XIIIB of the California Constitution. The revised 2022-23 limit is $4.3 billion above the $131.4 billion estimated in January and is a result of applying the grown factor of 7.9 percent to the prior year limit.
Libraries
The May Revision includes an increase of $335,000 ongoing General Fund to expand public outreach and education to local libraries in the state and patrons in under-served and multilingual communities. In addition, the May Revision includes $13.5 million one-time General Fund to expand the California State Library Partnership pilot program to provide state park passes for check out at local libraries.
CSDA will continue its advocacy efforts as the Legislature continues its various budget committee and budget subcommittee meetings to present the Governor with a finalized budget by the June 15 deadline. Should you have any questions regarding the May Revision, feel free to reach out to Cole Querry at coleq@csda.net
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