By @Ophelia Szigeti
CSDA Chief Executive Officer Neil McCormick responded to Governor Gavin Newsom’s 2024-25 State Budget proposal by stating, “We appreciate Governor Newsom’s proactive efforts to maintain the State’s commitments in the face of declining revenues. To succeed, it is all the more critical that the State Legislature and Administration take a mindful approach when considering new policy proposals that could increase costs or hamper revenues for special districts and other local agencies. The future of our communities and our economy depend on the water, sanitation, fire protection, parks, open space, healthcare, and other essential services our members provide together with the State and other partners.”
On January 10, Governor Newsom put forward his 2024-25 State Budget, totaling $291.5 billion ($208.7 billion General Fund) in proposed state spending. Disagreement between the Governor and the Legislative Analyst’s Office (LAO) over the size of the State’s deficit taking center stage, with the Governor projecting a $37.86 billion deficit, compared to the LAO’s projection of $68 billion.
Governor Newsom framed his administration as more optimistic than the LAO and underscored the divergence in opinions regarding short and long-term economic forecasts, with the LAO favoring long-term projections related to the State’s fiscal health. Notably, the Governor also restated his commitment to vetoing any bills proposing a tax increase, particularly referencing the so-called “wealth tax.”
California’s recent tax revenues faced uncertainty due to last year’s extreme winter storms and the subsequent delay in tax collection deadlines, extended by the IRS and California Franchise Tax Board to address the associated Presidential Major Disaster Declaration.
In presenting his budget proposal, Governor Newsom emphasized his desire to maintain commitments to funding promises for key programs in addressing homelessness, climate change, public safety, education, and retail theft prevention.
The Governor’s proposal includes a combination of methods to address the projected State Budget shortfall:
· $18.8 billion in budget resilience incorporating reserves, revenue, and funds borrowing.
· $12.2 billion withdrawal from the Budget Stabilization Account (colloquially known as the “Rainy-Day Fund”).
· $900 million of safety net reserve withdrawals.
· $5.7 billion from revenue and borrowing.
· $11.9 billion in belt tightening measures through reductions, fund shifts, freezing new contracts, pausing IT equipment purchases, non-essential fleet purchases and travel, and auditing the state spending efficiency on various programs.
· $7.2 billion through delays and deferrals of funding for projects.
Climate Change
Governor Newsom highlighted the state’s climate commitment, allocating $58 billion in 2021 and 2022. The 2024-2025 Budget maintains $48.3 billion for climate commitments, with over $10 billion from the Federal government. The budget summary highlights $6.7 billion in adjustments to climate programs, including reductions, delays, and funding shifts, primarily from the Greenhouse Gas Reduction Fund (GGRF), of $2.9 billion, $1.9 billion, and $1.8 billion, respectively.
Zero-Emission Vehicles
Funding of $10 billion which was committed in the 2021-2022 Budget is extended over seven years, including targeted investments for increasing access to clean transportation in disadvantaged communities. An expenditure reduction of $38.1 million is proposed, including Drayage Trucks and Infrastructure Pilot Project ($23.5 million), ZEV Manufacturing Grants ($7.3 million), and Emerging Opportunities ($7.3 million), while maintaining $477 million previously dedicated to those programs. A fund shift of $475.3 million to the GGRF, including ZEV Fueling Infrastructure Gants and Drayage Trucks and Infrastructure, is proposed, along with a $600 million GGRF delay from 2024-2025 across various programs, including ZEV infrastructure.
Transportation
The 2022 Budget Act allocated $13.8 billion for transportation programs and projects aligned with the state’s climate goals. Of this, $13.6 billion in investments are retained, with $200 million in General Fund reductions, $791 million in fund shifts, and $31 billion in delays impacting various programs.
To address these challenges, there is a proposed shift of $529.7 million from the General Fund to the Greenhouse Gas Reduction Fun (GGRF). Additionally, a $1 billion delay in Transit and Intercity Rail Capital Program funds from 2024-2025 to 2025-2026 is proposed, with $1 billion still available for this program in 2024-2025. The Budget also proposes shifting $261.4 million of the remaining available funds from the General Fund to the GGRF. Furthermore, the Budget proposes adjustments in the competitive Transit and Intercity Rail Capital Program funds awarded in 2023 to align with the project expenditure schedule over multiple years.
Water
The water-related budget items amount to $7.3 billion. Various programs for safe drinking water, water supply, reliability, recycling and efficiency, and Forecast Informed Reservoir Operations (FIRO), will also see reversions, reductions, and fund shifts. An included reversion of $88.4 million and a reduction of $350 million over two years for watershed and climate resilience programs will be seen within the Department of Water Resources and the Wildlife Conservation Board. There will be a reduction of $30 million in the upcoming fiscal year for Per-and-Polyfluoroalkyl support.
Wildfire and Forest Resilience
During 2021 and 2022, the Budget Acts allocated $2.8 billion over a four-year span to enhance investments in forest and wildfire resilience. The revised Budget will sustain $2.7 billion of these investments, extending them across a five-year timeframe. This allocation encompasses initiatives such as wildfire fuel breaks, community hardening, regional and community investments, and the procurement of seven C-130 aircraft for firefighting.
CEQA Judicial Streamlining
The Governor proposes ongoing $2.3 million from the General Fund to support implementation of a recently enacted CEQA judicial streamlining statute pertaining to infrastructure.
Recapitalization of the Infrastructure State Revolving Fund
The Budget proposes an increase of $50 million to bolster the Infrastructure State Revolving Fund, which in turn extends financial support to local governments for projects related to infrastructure in connection with clean energy, water, and the environment.
Public Safety Radio Modernization to Support Equal Access to 9-1-1 Services
The Budget is set to allocate an additional $6.4 million to the State of Emergency Telephone Number Account to support enhanced interoperability for state, local, and federal public safety personnel, and connect first responders to centralized command and dispatch.
Parks
The Governor’s budget proposal includes a reduction of $25 million for outdoor environmental education and access, while maintaining $90 million in previously allocated funds.
Mosquito & Vector Control
The Department of Pesticide Regulation Fund (the DPR Fund), which is primarily comprised of the mill assessment, is currently at a structural imbalance. The Budget seeks legislation to increase the mill assessment and make related changes to the program.
Libraries
The proposed Budget calls for a reduction of $131.3 million from a one-time allocation, which originally amounted to $439 million to support the Local Library Infrastructure Grant Program. Additionally, the Budget recommends relinquishing planned one-time investments, with amounts of $33 million in 2024-2025, $33 million in 2025-2026, and $34 million in 2026-27. The proposed Budget also significantly scales back broadband programs focusing on underserved communities, with regional library collaboration, due to lack of participation.
Labor, Workforce Development
The 2022 Budget allocated $2.2 billion in support of apprenticeships, providing workforce training for climate change mitigation, and fostering a diverse health and human services workforce. The 2024-2025 Budget proposes a reduction of approximately $100 million, as well as proposed delays totaling $734.5 million.
The California Jobs First Initiative, formerly known as the Community Economic Resilience Fund, faces a $300 million funding delay. The Budget includes $100 million General Fund annually for this initiative from 2024-2025 through 2026-2027.
Various reductions, reversions, and delays are anticipated to impact Healthcare Workforce Investments, High Road Training Partnerships, the Apprenticeship Innovation Fund, the Goods Movement Workforce Training Facility, the California Youth Apprenticeship Program, the Low Carbon Economy Program, the Displaced Oil and Gas Worker Pilot Fund, EMT Training, and the Women in Construction Unit. Additionally, a budgetary loan of $125 million from the Labor and Workforce Development Fund to the General Fund is proposed.
The Governor’s Budget proposal includes a section related to Senate Bill 525 (Durazo, 2023). SB 525 codified incremental minimum wage increases for specified healthcare workers, effective June 1, 2024. The Administration is seeking early action in January by the Legislature to add an annual “trigger” to make the minimum wage increases subject to General Fund revenue availability, clarify the exemption for state facilities, and make clarifications in connection with implementation.
ERAF
When the Educational Revenue Augmentation Fund (ERAF) initiated the redirection of property tax revenue from cities, counties, and special districts to K-12 schools in 1992, this reduction resulted in equivalent State General Fund savings that reduced the amount of State spending allocated to schools.
The Governor’s Budget includes a proposal to specify that charter schools are explicitly eligible for receipt of ERAF dollars. It has been the practice in some counties with excess ERAF dollars to exclude charter schools in the associated funding calculations when initially distributing ERAF dollars, thereby increasing the amount of excess ERAF dollars in the county and increasing the amount of funds returned to those local agencies that had their property tax receipts diverted into ERAF. However, the current Administration argues that this practice conflicts with existing state law and the Local Control Funding Formula that determines school funding. Administration officials had previously expressed as much to various counties where this phenomenon was discovered, instructing those counties to allocate ERAF dollars to charter schools as mandated by law.
To remedy any continued noncompliance, the Governor’s proposal would specify that charter schools are explicitly eligible for receipt of ERAF dollars and seemingly put an end to this practice, which would impact local agencies in excess ERAF counties by reducing the amount of excess ERAF dollars returned to local agencies within those counties. As this proposal is aimed at excess ERAF counties, the impacts would be limited to certain Bay Area counties (presently Marin, San Mateo, San Francisco, Santa Clara, and Napa, according to a 2020 report from the Legislative Analyst’s Office) as well as the county of Alpine.
#AdvocacyNews
#FeatureNews
#Revenue
#PublicWorksandFacilities
#BondsandFinancings
#Budget
#Broadband
#StateBudget
#ClimateAdaptation
#Energy/Utility
#Water
#EnvironmentandDisasterPreparedness
#FireProtection
#FloodControlandReclamation
#HumanResourcesandPersonnel
#NaturalResources
#RenewableEnergy
#Transit