Here’s what’s new in California Gov. Gavin Newsom’s state budget

The revised budget has grown since Newsom’s initial January plan from $144 billion to $147 billion in the general fund

In a preview of his revised state budget plan, Gov. Gavin Newsom announces a proposal to eliminate sales taxes on diapers and menstrual products. He revealed those and other proposals at a Sacramento news conference on May 7, 2019.
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Gov. Gavin Newsom said Thursday his revised state budget plan prioritizes shoring up California’s reserve funds, paying down pension debt and devoting new spending on housing, health care, early childhood and higher education.

What’s new?

The revised budget has grown since Newsom’s initial January plan from $144 billion to $147 billion in the general fund that covers most public services and a total of $213.5 billion, up from $209 billion in January.

That’s because short-term revenues are more than $3 billion higher than anticipated in January. But Newsom said most of the increased revenues are constitutionally obligated to reserves, debt repayment and schools, so January’s record $21.5 billion budget surplus remains relatively unchanged. And the long-term outlook is not so rosy, with the governor assuming slower economic growth will shave $1.6 billion off revenues in 2022-23 compared to the January forecast.

How does it bolster the state’s reserve funds?

Unlike his predecessor, fellow Democrat Jerry Brown, who took office in 2011 amid an economic downturn and confronted a multi-billion dollar budget deficit, Newsom’s first budget comes during a booming economy and record revenues. But like Brown, he assumes the good times won’t last. Newsom’s revised budget raises funding for reserves and paying down debts by $1.4 billion to $15 billion.

That includes $5.7 billion to build reserves and $4.8 billion to pay down California’s unfunded government employee retirement liabilities.

The revised budget adds $1.2 billion to California’s “Rainy Day Fund,” bringing the reserve to $16.5 billion in 2019-20 and putting it on a path to reach its constitutional cap of 10 percent of General Fund Revenues in 2020-21, two years earlier than predicted in January.

What about schools?

Newsom said his first budget brings spending on K-12 schools to about $5,000 more per pupil than it was eight years ago. The May budget increases ongoing funding for Special Education by nearly $200 million more than the January budget proposal, and also includes more spending on teacher recruitment and retention.

The revised budget maintains funding for two free years of community college tuition for first-time, full-time students. It also provides significant increases in funding for the California State University and University of California to prevent tuition increases over the budget year.

How about health care?

Gov. Newsom campaigned on promises of health care for all and “single-payer” government-run health care. Newsom said his budget “moves the state toward health-care-for-all while the state gears up for single payer.” How so?

The budget keeps a commitment to make California the first state to expand Medi-Cal coverage eligibility to undocumented immigrant young adults ages 19 through 25, and to subsidize middle-income earners to buy health care on the state’s Covered California “Obamacare” exchanges.

Housing and homelessness?

Newsom’s January budget plan included $1.75 billion toward increasing housing production. The May revision keeps that while devoting $500 million to remove barriers to building mixed-income housing.

Newsom called homelessness “out of control” and a “stain on the state.” His revised budget includes $650 million to help cities and counties provide emergency homelessness aid and more than $400 million to increase grants to families in the CalWORKs welfare program.

Other additional spending includes $20 million in legal assistance for eviction prevention.

How is the governor making it easier to afford high-cost, high-tax California?

Newsom’s budget proposes doubling the Earned Income Tax Credit, which he called “one of the most effective anti-poverty measures in our nation’s history.” His May proposal would double the Cal-EITC Cost-of-Living Refund, which helps economically distressed families with the costs of food, rent and child care for families with young kids proposed in January from $500 to $1,000.

The May budget revision expands paid family leave for each parent from six to eight weeks, allowing parents to take up to four months of leave after the birth or adoption of their child. The benefit provides workers 60 to 70 percent of their wages when they take time off work to care for a seriously ill family member or a new baby. Employees pay for it through a payroll tax of 1 percent on wages under $118,000.

Newsom’s office said the additional weeks off would be paid for without raising the payroll tax, by reducing the Disability Insurance fund reserve by 15 percent.

Earlier in the week, Newsom, a parent himself, announced he would eliminate sales taxes on diapers and tampons and other menstrual products, which he said would ease financial burdens on young families.

California has the highest state-level sales tax rate of 7.25 percent, and the ninth-highest average combined state and local sales tax rate at 8.56 percent. The tax exemption for diapers is estimated to cost the state roughly $35 million a year, and the exemption on menstrual products about $20 million a year.

What about fighting wildfires and other disasters?

The governor’s January budget proposed $769 million in additional funding for wildfire prevention, response and recovery. The revised budget adds an additional $39.9 million to enhance the state’s capacity to tackle more frequent and complex natural disasters.

Newsom announced $75 million in additional funding to help customers when utilities temporarily turn off electricity in rural areas at high risk of fires and strong winds. The money, he said would be used to pay for alert systems, portable generators and other related expenses.

Other additional spending includes $5.9 million in ongoing funds to increase staffing and response capacity at the Office of Emergency Services, $2.8 million for debris removal, $2 million for local housing issues and $1 million for engineering and operations issues facing drinking water systems and wastewater utilities.

Staff Writer Paul Rogers contributed to this report.

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