Gov. Gavin Newsom unveiled his first California budget proposal on Thursday with a plan to pour hundreds of millions of dollars into housing and homelessness, a start on fulfilling one of his major campaign promises.
He said he wants to cut red tape to spur housing construction, too, by waiving environmental reviews for certain projects and reviewing the state’s developer impact fees.
“We have a supply and demand imbalance in this state,” he said. “Until we get serious about it, the state will continue to lose its middle class....If we continue down this path, the state is going to be a vestige of itself.”
The Democratic governor announced the plan at a sprawling two-hour press conference where he alternately touted expensive new investments in education and health care while cautioning against overspending.
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His 2019-20 budget proposal includes a $144 billion general fund, a 4 percent increase over the spending plan former Gov. Jerry Brown signed in June.
The total proposal — including money earmarked for special purpose funds — tops $209 billion. That’s about $8 billion more than Brown’s final budget.
Newsom stressed that much of the increased spending would go to one-time projects, such as lump payments toward the state’s public employee pension debts and grants for special programs.
They won’t lock in state spending if a recession hits and crimps tax revenue. He plans to continue setting aside money in reserves, too.
“The message we are advancing here is discipline, building a strong foundation,” he said.
His housing plan contains one-time funding for cities and counties, including $250 million to help communities plan for more housing. An additional $500 million will go to communities that reach their housing production goals and can be used for general purposes.
“This is a crisis,” Newsom said. “We’re simply not developing enough housing units.”
Newsom also wants to restructure the way California sets housing goals to make them “more realistic and more nuanced.”
He proposed giving the state’s housing department more power to create and enforce those plans. After several years, Newsom’s plan calls for taking away some transportation funding from communities that aren’t producing housing fast enough.
His budget includes $500 million in grant funding to address homelessness. Part of that money is intended for shelters, which Newsom said should be exempted from some environmental review because of the severity of the state’s homelessness crisis.
The budget slates more money for developer loans to building moderate-income housing and an expansion of the state’s housing tax credit program. Newsom also promised an inventory of state property to assess where housing can be built.
Taking office with a surplus
Newsom during his campaign promised progressive policies with big price tags, but has also pledged to build up the “largest fiscal reserve of any state in American history.”
He took office with a strong economy that has filled state budget reserves with a projected $16 billion that could help him navigate a recession. The Legislative Analyst’s Office projects the state will have an additional $14.8 billion surplus that lawmakers and Newsom could use on practically anything.
Newsom’s own team estimates that the surplus will be even greater: more than $21 billion.
The Thursday announcement built on details his office had released over several weeks, including nearly $2 billion for early learning programs and a sweeping health plan.
To fund health insurance subsidies for middle-income families, Newsom proposed reinstating the individual mandate, which requires people to have health insurance or pay a penalty. And he wants to let young immigrants without legal status enroll in Medi-Cal, the state’s health insurance program for low-income people, until age 26.
While they disagreed with some of his priorities, particularly the expansion of Medi-Cal eligibility to undocumented immigrants, Republican lawmakers said they were encouraged by Newsom’s emphasis on fiscal responsibility and one-time spending.
Assemblyman Jay Obernolte of Big Bear Lake, the Republican vice chair of the budget committee, praised Newsom for proposing to pay down budget debts and unfunded pension liabilities.
“This governor seems very committed to limiting the growth of ongoing state spending, which is very wise because no one can say for sure when a recession might come,” Obernolte said.
‘I love this Legislature’
Working families would see tax credits under the plan. Newsom wants to double California’s earned-income tax credit and offer it to hundreds of thousands of more households. He’d also increase the value of Calworks grants for low-income families.
Assemblyman Phil Ting, a San Francisco Democrat, said he was pleased that Newsom had engaged early with lawmakers and accounted for their priorities in his budget plan. He said negotiations in the coming months would largely be over the details of shared priorities like housing, homelessness and health care.
“On the big issues, we absolutely agree,” said Ting, who leads the Assembly Budget Committee.
Newsom’s budget plan represents his opening proposal in budget negotiations that will continue through June, the deadline for the governor and the Legislature to reach a deal. Lawmakers have already proposed more than $40 billion in new spending, which Newsom has said needs to be “whittled down.”
Newsom also wants to provide six months of paid leave for parents after the birth of a child. That would be the most expansive offering of any state in the country, but Newsom doesn’t yet have a plan to finance it.
California’s current system, with up to six weeks of partial pay, is funded by a payroll tax on employees, and raising that tax would require a two-thirds vote of the Legislature.
Newsom characterized his proposal as a cost-effective investment in families, arguing children are better off when they have more time with their parents.
“It’s a no damn brainer,” he said. “I’m hoping the Legislature feels the same because it’s going to cost some money.”
But on Thursday, he was enthusiastic about the conversations he’s had with lawmakers.
“I love this Legislature,” he said. “You wanna ask how we’re working together? We are working together. This budget reflects that.”