This morning, Governor Gavin Newsom presented the
May Revision of his proposed 2021-22 budget for California. The $267.8 billion budget, of which $196.8 billion is from the General Fund, included a week of press tours around the state leading up to the announcement of his $100 billion California Comeback Plan, the biggest economic recovery package in the state’s history. Using the state’s projected $75.7 billion surplus and over $25 billion in federal relief, this plan includes comprehensive strategies and major investments to address five of the state’s most stubborn challenges. These strategies include:
- Provide immediate relief for families and small businesses.
- Confront the homelessness and housing affordability crisis.
- Transform public schools into gateways to opportunity.
- Build infrastructure of the next century.
- Combat wildfires and tackle climate change.
The May Revision includes $24.4 billion in reserves, which include: $15.9 billion in the Proposition 2 Budget Stabilization Account (Rainy Day Fund) for fiscal emergencies, $450 million in the Safety Net Reserve, $4.6 billion in the Public School System Stabilization Account, and an estimated $3.4 billion in the state’s operating reserve.
The May Revision continues to pay down the state’s long-term retirement liabilities and reflects $3.4 billion in additional payments required by Proposition 2 in 2021-22 and $7.9 billion in additional payments over the next three years. The improved revenue forecast also allows for the elimination of $2 billion in proposed program suspensions that were delayed at the Governor’s Budget.
Governor Newsom was clear that every budget allocation in this May Revision was made in an effort to achieve the goals outlined in his California Comeback Plan.
I. Immediate Relief for Families and Small Businesses
Earlier this year, the Governor and the Legislature approved a relief package that provided a $600 Golden State Stimulus to 5.7 million households and $2.5 billion for impacted small businesses. The May Revision proposes a major expansion to the Golden State Stimulus, providing tax refunds to middle-class families that make an adjusted $75,000 or less. Under the plan, two-thirds of Californians will benefit from $600 payments. Qualified families with dependents, including undocumented families, will also be eligible for an additional $500 payment.
The May Revision continues to invest in small businesses by adding $1.5 billion to the state's earlier investments that have helped nearly 200,000 businesses to stay open and keep Californians employed.
During the pandemic, many Californians have been able to remain in their homes through the help of state and federal eviction moratoriums and significant federal investments that have helped pay for rents and utilities and provided mortgage assistance. The May Revision also includes $2 billion to pay down unpaid utility debt, including water and electricity, that has accumulated during the pandemic.
Included in the May Revision for Small Businesses:
- Estimated $895 million investment in the State Small Business Credit Initiative (SSBCI), which works to strengthen state programs that support financing of small businesses.
- Increasing the CalCompetes tax credit program to $360 million, and establishing a one-time $250 million grant program, to incentivize businesses to relocate to California.
- $250 million investment in California’s ports to address revenue loss and bolster future economic activity.
- $200 million to expand sales tax exclusions through the California Alternative Energy and Advanced Transportation Financing Authority (CAEATFA) to promote, grow and incentivize green manufacturing in California.
- $147 million for the Main Street Small Business Tax Credit to assist small businesses that have hired and retained workers since the second quarter of 2020.
- $95 million to jumpstart California’s tourism industry, one of the largest economic drivers in the state that was particularly impacted by the pandemic.
II. Homelessness and Housing
Combined with the Governor's Budget proposals, the May Revision makes the largest investment to combat homelessness in the state’s history—$11.87 billion over the next two fiscal years.
The May Revision also includes $1 billion for the CalWORKS housing support program, $560 million to address family homelessness, and $25 million for veteran homelessness. The May Revision makes numerous investments to address housing affordability, including accessory dwelling unit financing, regional planning grants, funds to preserve affordable units, and funds to promote homeownership.
The Governor has the goal of getting more than 65,000 people off the street by proposing:
- $7 billion for Project Homekey
- $1.75 billion to build thousands of affordable homes
- $447 million for student homelessness
- $193 million for encampment strategies
- $150 million for Project Roomkey
His plan also calls to end family homelessness in 5 years by investing $3.5 billion:
- $1.85 billion for new homeless housing
- $1.6 billion for family homeless prevention and rent support
- $40 million for grants to local government
In order to reach the most vulnerable homeless population, the May Revision proposes to rebuild the behavioral health system that was dismantled years ago and invest $3.5 billion in new housing and clinical beds, care for adults and seniors and conservatorships.
III. Public Education
Governor Newsom’s plan proposed to invest an additional $20 billion to support the potential of every California student and make the structural change necessary to reduce barriers while increasing opportunities across the board, including massive investments in K-12 public schools, creating universal Pre-K and college savings accounts for 3.7 million low-income children in public schools.
The May Revisions also proposed a $2 billion investment to implement health and safety measures, including improved ventilation and measures to expand access to vaccines and testing, in order to have all schools safely reopen.
IV. Infrastructure
Taking on the digital divide, Governor Newsom’s plan advances the state’s work toward universal broadband with a $7 billion investment to expand broadband infrastructure and to increase access and achieve affordability. The Plan will help build out a statewide middle mile network for improved access in underserved regions, including rural areas, and allows local governments and Tribes to access last mile funding, which connects broadband to the home.
The May Revision also proposes investments in California’s transportation system with:
- $52 billion 5-year capital plan;
- $4.2 billion for High Speed-Rail;
- $3.1 billion for rail and transportation; and
- $3.9 billion for deferred maintenance and accelerated projects.
V. Climate Change and Wildfires
Combined with the Governor's Budget, the May Revision proposes $5.1 billion over multiple years for a water resilience package to expand and protect water supplies across the state. The package supports drinking water and wastewater infrastructure, water recycling projects, immediate drought support to communities, and improves long-term ecological conditions to help species cope with climate change.
The Governor’s $5.1 billion proposed investment, over four years, aligns with his July 2020 Water Resilience Portfolio, a roadmap to water security for all Californians in the face of climate change. It is shaped by lessons learned during the 2012-16 drought, such as the need to act early and gather better data about water systems. The package includes:
- $1.3 billion for drinking water and wastewater infrastructure, with a focus on small and disadvantaged communities.
- $150 million for groundwater cleanup and water recycling projects.
- $300 million for Sustainable Groundwater Management Act implementation to improve water supply security, water quality and water reliability.
- $200 million for water conveyance improvements to repair major water delivery systems damaged by subsidence.
- $500 million for multi-benefit land repurposing to provide long-term, flexible support for water users.
- $230 million for wildlife corridor and fish passage projects to improve the ability of wildlife to migrate safely.
- $200 million for habitat restoration to support tidal wetland, floodplain, and multi-benefit flood-risk reduction projects.
- $91 million for critical data collection to repair and augment the state’s water data infrastructure to improve forecasting, monitoring, and assessment of hydrologic conditions.
- $60 million for State Water Efficiency and Enhancement Program grants to help farmers reduce irrigation water use and reduce greenhouse gas emissions from agricultural pumping.
- $33 million for fisheries and wildlife support to protect and conserve California’s diverse ecosystems.
- $27 million for emergency and permanent solutions to drinking water drought emergencies.
Along with the drought investments described above, other climate change proposals of note in the May Revision are $10 million for a statewide Pesticide Notification Network, $926 million for sustainable agriculture, $1.8 billion for ZEV adoption acceleration, $912 million to accelerate California’s progress on meeting its clean energy goals, a wildfire resiliency plan and changes to the climate catalyst fund.
Pesticide Notification Network: The May Revision proposes $10 million one-time General Fund to implement a statewide infrastructure network to provide equitable access to important information about local pesticide use. The Department is launching a process this summer to develop and adopt the statewide regulations necessary for advanced public notification of certain pesticide applications.
Sustainable Agriculture: The May Revision builds on the $285 million included in the Governor’s Budget and proposes an additional $641 million over two years ($491 million in 2021-22) for a total $926 million ($776 million in 2021-22) in strategic investments to support California’s agriculture industry as it addresses continued challenges while also producing nutritious food and advancing the state’s climate resilience objectives.
