Governor Newsom Proposes 2020-21 State Budget

SACRAMENTO – Governor Gavin Newsom submitted his 2020-21 State Budget proposal to the Legislature today which makes responsible investments in the state’s economic future while tackling head-on persistent challenges facing the state.

“California’s economic growth has fueled the nation’s economy. As 2020 begins, California’s economy is the strongest in the nation and the fifth largest in the world. We’re eliminating debts, paying down pension liabilities, growing our reserve funds – the largest ever at $21 billion – and one out of every seven new U.S. jobs is in California,” said Governor Newsom. “Despite the progress we’ve made, there are deep, structural challenges that threaten our state’s future and demand our urgent attention. These problems – our widespread affordability crisis, expanding homelessness crisis and catastrophic wildfires – have been decades in the making and won’t be fixed overnight. California is doing more than ever to tackle these challenges and this budget builds on that work with new investments and ideas to take on these longstanding issues.”  

Building Reserves and Reducing Liabilities

California is continuing to build a strong economic foundation to anticipate potential risks. The Budget continues to grow the reserves in the Rainy Day Fund and assumes an additional transfer of nearly $2 billion in 2020-21 and an additional $1.4 billion over the remainder of the three-year forecast period. The Rainy Day Fund balance is projected to be $18 billion in 2020-21 and $19.4 billion by 2023-24. The Budget also:

  • Maintains $900 million in the Safety Net Reserve
  • Sets aside $110 million more in the Public School System Stabilization Account, bringing its total balance to $487 million.
  • Reserves $1.6 billion in the Special Fund for Economic Uncertainties to address emergencies and other unforeseen events. Overall, the Budget has $21 billion set aside in reserves.

Addressing the Affordability Crisis

The state’s affordability crisis continues to threaten working families who are burdened by the rising costs of health care and prescription drugs, and the sky-high cost of housing and rent. Last year, the state passed historic measures to expand access to health care subsidies for the middle class, approved the strongest renter protection law in the nation, and provided $1 billion in tax relief for working families through the expanded Earned Income Tax Credit (EITC), while investing in affordable housing production efforts.

The Administration has announced a new CalRx generic drug program making California the first state to create its own generic drug label and making the state’s generic prescription drugs available for sale to all Californians. The Budget transforms Medi-Cal to a more consistent and seamless system by reducing complexity and increasing flexibility and establishes a single market for drug pricing within the state.

The Budget also moves the state toward universal coverage and furthers cost containment goals by expanding full-scope Medi-Cal coverage to low-income undocumented Californians aged 65 and above.

Building on the state’s new renter protection law and unprecedented $1.75 billion investment in last year’s budget to increase housing supply and hold cities accountable for regional housing goals, this year’s Budget authorizes $500 million annually for the state’s housing tax credit program and continues to support housing development on excess state lands. In addition, the Administration is streamlining state processes to accelerate housing production. Finally, the Administration continues to work to establish a trust with $331 million that will provide borrower relief and support housing counselors or other legal aid agencies in representing homeowners and renters in housing-related matters.

Confronting the Homelessness Crisis

Homelessness is an issue that impacts both urban and rural communities throughout the state, and puts stress on public resources from emergency rooms to jails and public works departments. It is a complex social services problem and must be combatted at its root causes, which is why the Budget introduces several new strategies to build on the $1.15 billion provided to local governments in the last two budgets.

The Budget proposes more than $1 billion to radically shift the state’s involvement to house the many unsheltered individuals living in California, by launching the California Access to Housing and Services Fund with a $750 million initial investment. This Fund will create a structure for developing affordable housing units, supplementing and augmenting rental subsidies, and stabilizing board and care homes.

The additional funding will come from the Medi-Cal Healthier California for All initiative and will also contribute to addressing the homelessness crisis by transforming the Medi-Cal system to better serve individuals experiencing mental illness and homelessness. The Administration will form a task force to improve the state’s behavioral health system as well as strategies to strengthen enforcement of behavioral health parity laws.

Emergency Response and Effective Government

The 2019 Budget Act included nearly $1 billion to enhance the state’s emergency response capabilities. The Budget builds on this foundation with investments that further strengthen California’s ability to prevent and respond to fires and that provide the state’s first responders with additional capabilities and support. The Budget enhances the Department of Forestry and Fire Protection’s operational capabilities by adding funding for new firefighters during peak fire season, increasing the number of year-round engines, and providing further relief coverage to support state firefighter health and wellness. The Budget also increases the use of technology by obtaining Light Detection and Ranging (LiDAR) data to better inform resources management and hazard assessment decisions, and establishes a new Wildfire Forecast and Threat Intelligence Integration Center to analyze data on wildfire risk.

Promoting Opportunity for All

The Administration continues working toward a universal preschool system and a comprehensive, quality, and affordable child care system for California while helping parents thrive. The Budget builds on the historic investments made last year to expand access to child care, preschool and full-day kindergarten with funding for 10,000 additional full-day or full-year preschool slots, moving the state closer to its goal of universal preschool for all income-eligible four-year-olds. The Budget also expands the Earned Income Tax Credit, or EITC, and increases the amount of child support payments retained by families on CalWORKs, effective January 1, 2022.

The 2019 Budget Act expanded Paid Family Leave from six to eight weeks, moving two-thirds towards the goal of six months of paid family leave for two parents to bond with a new child. The Budget builds on this expansion by proposing to extend job protections to more employees, thereby expanding the number of families that can take advantage of this benefit.

The Budget also proposes developing a new adverse childhood experiences, or ACEs, cross-sector training program with the goal of reducing adverse childhood experiences and toxic stress by half in a generation and establishing a new Department of Early Childhood Development under the Health and Human Services Agency, effective July 1, 2021.

Largest K-12 Education Per-Pupil Expenditure in History

Preparing students to succeed is important to California’s future. That’s why the Budget proposes a historic level of funding for K-12 schools. Per-pupil funding has grown by more than $7,200 since its low point in 2011-12 and achievement gaps are closing for many students. The state has a well-documented, long-term, statewide teacher shortage in the areas of special education, science and math. The Budget proposes an investment of approximately $900 million in teacher training, including professional development, educator service awards, and teacher residency programs. These investments will increase and improve the teacher workforce, which is foundational to improving student outcomes.

The Budget also includes $300 million one-time for grants and technical assistance to prepare and implement improvement plans at the state’s lowest-performing schools, and includes $300 million one-time for grants to develop community school models with innovative partnerships that support mental health and the whole child. The Budget includes a 40-percent increase in state funding for school nutrition programs to boost the quality of meals provided and to expand access. The Budget also includes $10 million for grants to foster innovative farm-to-school linkages that support sustainable agriculture and make more healthy foods available to schoolchildren. Local educational agencies will also continue to benefit from the massive $3.15 billion non-Proposition 98 General Fund payment made on their behalf to the California State Teachers’ Retirement System (CalSTRS) and the California Public Employees’ Retirement System (CalPERS) Schools Pool. An estimated $850 million is buying down the employer contribution rates in 2019-20 and 2020-21 and the remaining $2.3 billion is being paid toward long-term unfunded liabilities. Overall, these payments are expected to save schools $6.9 billion over the next three decades.

Expanding Access to Higher Education

The 2019 Budget Act included major investments in higher education that provided two years of tuition-free community college and increased enrollment and investments to improve student success across all segments. The Budget establishes expectations that the University of California and California State University increase undergraduate enrollment, increase student supports and encourage degree completion through innovative delivery methods, including University Extension centers.

The Budget proposes major investments in Inland California communities that face higher unemployment and create fewer jobs in high-wage sectors. The Budget allocates additional ongoing funding to expand enrollment and increase operational support for the UC Riverside School of Medicine and to expand the UC San Francisco School of Medicine Fresno Branch Campus in partnership with UC Merced. The Budget also includes funding for a major new food innovation corridor in the Central Valley.

Climate Budget

The Budget proposes a comprehensive approach to California’s investments to protect the state’s environment, address the effects of climate change, and promote resiliency. This climate budget includes $12 billion over the next five years. Three key areas of the climate budget are a proposed climate resilience bond, cap-and-trade expenditures to continue the transition to a carbon-neutral economy, and a new Climate Catalyst Fund to promote the deployment of new technologies, especially by small businesses and emerging industries.

The Climate Catalyst Fund, which will be administered by the Infrastructure and Economic Development Bank, will finance investments in low-carbon transportation, sustainable agriculture and waste diversion through low-interest loans. The Budget proposes to capitalize the Fund with $1 billion General Fund over the next four years.

The Fund will have a revolving loan structure that will leverage private capital and will support projects well into the future. It will be designed to support good jobs and a just transition to achieving California’s climate goals.

Reimagining Criminal Justice

The Budget builds on important steps taken last year, including shifting juvenile justice to focus on rehabilitation and reentry, investing in restorative justice, community-based violence prevention, substance-use disorder treatment, prison literacy and pretrial diversion. The Budget proposes to continue expansion of opportunities for rehabilitation and treatment – starting with the youngest offenders in state prison. The Budget proposes to cluster the 5,800 young offenders (under age 26) into campus-style environments within existing facilities, with specialized programming and educational opportunities. The Budget also includes a major investment in technology for inmates participating in academic programs and expanded access to higher education programming through partnerships with the California State University system. The Budget includes a major proposal to enhance staff development through a new training facility and training program for correctional officers and counselors.

Jobs, the Economy and Protecting the Environment

As California enters a new decade, it must prepare for the jobs and economy of tomorrow. Rapid advancements in technology, automation and artificial intelligence are reshaping the economy and the nature of work, and the state needs to better align data, policy and program analysis for the state’s workforce training programs. The Budget includes funding to establish a new Department of Better Jobs and Higher Wages to consolidate the workforce functions currently dispersed across the Labor and Workforce Development Agency. It also funds the next $1 dollar increase in the state’s minimum wage, bringing it to $13 per hour for most employees as of January 1, 2020. The Budget also proposes to reduce the minimum franchise tax for new small businesses, removing a barrier to entrepreneurship and job creation. Finally, the Budget allocates $53 billion to the state’s infrastructure over the next five years, focusing on investments that underpin economic activity and create a sustainable and resilient California.

More information on Governor Newsom’s budget proposal, including the full budget summary, is available at www.ebudget.ca.gov.

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