Awash in Cash, Newsom Ups Ante With $267 Billion Revised California Budget

The budget behemoth includes money for taxpayers, schools, the homeless crisis and the fight against climate change.

SACRAMENTO, Calif. (CN) — After a year of pandemic-induced sweeping budget cuts that ripped billions from schools and popular social programs, a spending spree is on tap in California.

Capping a dramatic turnaround in which the state morphed a record-high deficit into an unprecedented surplus, California Governor Gavin Newsom on Friday proposed a mammoth $267 billion budget built on a conveniently timed $100 billion windfall. The plan represents a $40 billion increase from his initial January proposal and includes $196 billion in general fund spending.

The flush spending plan — which comes as Newsom is actively fending off a recall election — is stocked with $600 checks to taxpayers, major education gains, record homelessness spending and billions to ward off climate change and wildfires. The Democratic governor says the state can afford the ambitious spending plan thanks to an unexpected $76 billion surplus and $26 billion more in federal Covid-19 aid.

Newsom said the budget bill will “set the state up for not just a comeback, but an extraordinary decade, arguably century ahead.”

Friday’s budget reveal ends a week-long media blitz in which Newsom painted his expansive — and expensive — vision for the Golden State’s pandemic comeback.

On Monday, Newsom dropped a bombshell revelation that the state’s finances had experienced a $125 billion reversal and proposed sending $12 billion worth of “stimulus checks” to taxpayers. He would go on to pitch $12 billion to confront homelessness, $4 billion in small business grants, universal transitional kindergarten and college savings accounts for millions of kids and billions more to increase broadband internet service. 

The array of budget proposals were announced at a dizzying pace in cities like Los Angeles, Oakland and Sacramento in a what could easily be construed as campaign stops.

Newsom, 53, is coining his strategy as the “California Comeback Plan.”

Friday’s proposal kicks off the final round of negotiations between Newsom and lawmakers, and regardless of the final product which must be submitted by June 15, it will be a sharp contrast to the current version crafted last summer during the height of the pandemic.

Instead of an ambitious spending budget full of new spending, Newsom was forced to come to terms with a jarring $54 billion deficit.

Newsom and Democratic lawmakers eventually compromised on a $202 billion spending bill that relied on deferring payments meant for schools and pulling from the state’s rainy day fund to patch the dried-up tax revenues. They cast the plan, which included major cuts to social programs, the judiciary and state worker salaries, as “pragmatic” and a boost for Main Street. 

This time around, many of the cuts are being restored and extended, specifically for K-12 and higher education.

Up $17 billion from January’s proposal, K-12 funding spikes to a record $121 billion and boosts total per pupil spending to $21,152. The plan calls for a flood of new teachers, 100,000 subsidized day care slots and assumes schools will return full in-person instruction in the fall.

Newsom, a father of four, encouraged school districts to “reimagine” public education and if necessary extend the length of the traditional year to make up for lost classroom learning. To help bridge the digital divide, he wants to divvy $7 billion in federal dollars to improve broadband access in rural areas.

“Broadband for all, let’s do this,” Newsom said.

Not to be left out, state colleges and universities also won big in the spending spree.

Under the proposal, the University of California and California State University systems see a $2.3 billion boost, and figure to receive more in future federal funds. In addition, Newsom wants to spend $433 million to transform Humboldt State University into the state’s third polytechnic university, a move he says will help “transform” the economy in the northern part of the state.  

The “generational” budget put forward Friday is largely the result of the state’s volatile tax system which heavily relies on income taxes.

Unemployment may have spiked to record highs, but even the pandemic couldn’t slow down the state’s richest taxpayers. A booming stock market padded the portfolios of California’s countless millionaires and billionaires and ultimately spurred the tax windfall propping Newsom’s budget. 

California’s suddenly rosy finances have Newsom circling back to an issue that has perpetually plagued the state: homelessness.

Despite making the issue a central tenet of his gubernatorial campaign and the main focus of his 2020 State of the State Address, the number of people on California streets has increased under Newsom

To turn the tide, Newsom is calling for another record $12 billion over the next two years to fight homelessness and find homes for at least 65,000 people. As proposed, California would spend $8.75 billion to “unlock” 46,000 housing units in addition to $3.7 billion toward rent support and preventative services.

“This is simply without precedent,” Newsom continued. “Our goal is to actually establish a framework and goal, and that’s to end family homelessness.”

Sprinkled amid the spending comes a bit of prudent budgeting a la former Governor Jerry Brown.

The budget restores 80% of the payment deferrals taken in the last budget, adds $15.9 billion to the rainy day fund and pays down over $11 billion in unpaid pension and retirement liabilities over the next three years. Newsom also proposes nixing some of the pay cuts state workers were handed during last year’s negotiations.

“While the economic outlook and revenue have improved dramatically, the same budget resiliency that helped the state through the pandemic will continue to be critical to protect programs in the future and to prepare the state for emergencies,” the budget document claims.

Newsom and lawmakers dealt the judicial branch a devastating blow last year, but Friday’s proposal calls for a much-needed lift of the state’s 58 trial courts, appellate districts and Supreme Court. The revised budget includes $4.6 billion in total judiciary funding, including a restoration of the 2020-2021 cuts and money to address case backlogs as well as fine forgiveness.

As proposed, the courts will receive $300 million in federal funds for debt forgiveness, $140 million to enhance pretrial funding, $60 million for trial courts to fight civil and criminal case backlogs stacked up during the pandemic and $188 million for deferred maintenance.

California Chief Justice Tani Cantil-Sakauye welcomed the improved outlook in a statement: “It builds on his January budget proposal, restores previous cuts, expands pretrial programs focused on the safe and efficient release of arrestees, supports ongoing Judicial Council programs that address the needs of low-income court users, alleviates burdensome fines and fees for those who can’t afford them, and addresses pressing court infrastructure needs. In addition, his proposal bolsters efforts to assist courts recovering from pandemic-related challenges and backlogs.”

Meanwhile attorney groups were less enthusiastic about the budget, saying $60 million isn’t enough to clear the ever-growing case backlogs and pressed the governor for at least $100 million.

“Court closures in response to Covd-19 have made the problem worse, growing over the last year to an estimated one million or more cases languishing with no movement towards resolution,” said Nancy Drabble, CEO of Consumer Attorneys of California. “Having access to California’s courts is a key element of ‘California’s comeback. Do not allow the doors of justice to slam shut on California.”

Newsom’s blueprint was predictably well received by key Democratic lawmakers, including state Senator Nancy Skinner, chair of the Senate Budget Committee, who said “let the negotiations begin.”

“Thank goodness California is in the position to make transformative investments to end family homelessness, lift those hurt by the pandemic and properly fund our schools. Governor Newsom’s proposed budget does that and more, and compliments the state Senate’s priorities,” said Skinner, D-Berkeley.

The call to spend fell on deaf ears within the state’s minority party which claims the massive surplus is proof state taxes are exorbitant.

“I urge the governor to focus on fixing long-standing problems instead of short-term political promises,” Assembly Republican Leader Marie Waldron responded in a statement.

Among the other notable items in Newsom’s budget:

$750 million to brace the impact of lost jobs in places like Kern County as the state transitions away from fracking and the fossil fuel industry

$200 million to cap abandoned oil and natural gas wells littering the state

$954 million to clean up toxic sites like Exide’s former Los Angeles battery recycling plant

$1.5 billion for roadway litter removal and public beautification projects

$950 million to paydown federal loans used to pay unemployment benefits during the pandemic

$305 million to clear the state’s embarrassing unemployment case backlog

$1 billion to boost transportation improvements underway from the 2028 Los Angeles Olympics

$4.2 billion to continue construction on high-speed rail

$300 million to eliminate traffic fine debts owed by low-income Californians 

$1 billion to expand health care for undocumented adults over 60

$105 million to support immigrants arriving at the southern border

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