SACRAMENTO, Calif. (CN) — Taking advantage of an unexpected windfall spurred by overperforming tax receipts at the tail end of 2020, California Governor Gavin Newsom released a budget proposal Friday chalked with billions for the state’s Covid-19 response and school reopenings.
The $227 billion plan includes $164.5 billion in general fund spending, up from $202 billion and $134 billion, respectively, in the current budget. Newsom’s third budget proposal dedicates $14 billion to fight the pandemic and resurrect shattered businesses and low-income workers, as well as record K-12 education spending.
From a nearly empty auditorium in downtown Sacramento, Newsom told a select group of reporters the state’s finances may have done a 180 over the last year, but its progressive values haven’t.
“My, has so much changed,” Newsom said. “The numbers changed dramatically, a $60 billion swing, but our values did not change.”
On the strength of a booming economy that produced over 115 straight months of jobs expansion, a jubilant Newsom spent hours last January regaling reporters with items from an ambitious $222 billion budget. The budget, which would have been the largest in state history, was dotted with progressive items including billions to expand health care to homeless and undocumented Californians, as well as a proposal to ask voters to take out a $4 billion bond to fight climate change.
The plans were short-lived however, as the coronavirus soon invaded the West Coast and caused the wholescale shutdown of the state economy. In a matter of months Newsom and his advisers went from plotting ways to spend a $5.6 billion surplus to bracing for an estimated $41 billion drop in revenue.
“Numbers like this haven’t been felt like this since the Great Depression,” Newsom said this past May, amid an estimated 18% statewide unemployment rate.
Forced back to the drawing board, 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.
Meanwhile state Republicans, who held less than a third of seats in both the Senate and Assembly, warned the budget was built on flimsy ground and would bite taxpayers down the line.
The watered-down, pandemic-altered budget stood as a stark reminder of just how volatile California’s finances and budget negotiations can be.
But as the pandemic stretched into the fall, it became apparent Newsom’s advisers and the Legislature overshot the scope of the deficit.
Once the initial statewide lockdown was eased businesses quickly reopened, workers returned as did customers’ spending habits. By November, tax receipts had outpaced the budget’s projections by over $11 billion, spurring experts to predict the state would have a massive one-time $26 billion haul for the 2021-22 budget.
Newsom relayed his vision for the windfall on Friday, calling for billions to reopen schools, prop up small businesses and fight climate change.
The plan includes $2 billion in incentives meant to spur schools to resume in-person classes over the next few months, with a specific focus on elementary schools and districts serving underprivileged students.
The Democratic governor also wants lawmakers to approve a $4.5 billion economic recovery plan that includes $1.5 billion for clean energy transportation, $575 million for small businesses and nearly $800 million toward job creation. He’s also requesting $300 million to boost the state’s Covid-19 vaccination effort along with a $4.1 billion environmental spending plan.
Of the $4.4 billion earmarked for immediate Covid-19 relief, $2 billion would be spent on testing, $473 million for contact testing and $372 million for vaccines. Newsom said the key to California’s recovery is figuring out a way to speed up the statewide vaccination effort that has stalled in the early stages.
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