Global Courant
Governor Gavin Newsom and Democratic legislative leaders on Monday agreed on a $310.8 billion budget spending plan that will cut investment to fight climate change and reflect a compromise on the governor’s last-minute proposal to accelerate infrastructure projects across California.
The 2023-24 budget deal, which lawmakers will vote on this week in a series of bills, ends weeks of power struggles among Democrats that began after the governor introduced a package of infrastructure bills in the latter part of the budget process, including making it easier to to approve his highly controversial plan to build a $16 billion tunnel under the Sacramento-San Joaquin River Delta to transport water south.
Newsom last week threatened to veto the legislature’s budget priorities unless they approved his infrastructure plan. The two sides eventually settled on a deal that takes the delta tunnel project out of the package but maintains measures to mitigate delays on other major projects due to legal challenges under California environmental law.
“In light of ongoing global economic uncertainty, this budget increases our fiscal discipline by increasing our fiscal reserves to a record $38 billion while preserving historic investments in public education, healthcare, climate and public safety,” Newsom said in a statement. statement announcing the deal late Monday night.
California’s budget deficit complicated negotiations at the Capitol, where financial analysts expect tax collections to fall nearly $32 billion short of money allocated to state programs.
The governor and leaders of the Democratic-led legislature agreed to defer nearly $8 billion in spending, including the allocation of $550 million to build facilities for transition and daycare programs. Lawmakers and the governor agreed to another $8 billion in reductions, such as a $750 million payment to the federal government for COVID-related unemployment insurance debts.
The shortfall marks a new era of economic challenges for California that could hamper Newsom’s ability to deliver on his costly policy promises in his second term. The current deal aims to maintain funding for Newsom’s major programs, including expanding Medi-Cal eligibility to all immigrants, regardless of legal status, while tucking away $37.8 billion in reserves.
Here’s what you need to know about six key areas of the 2023-24 Budget Spending Plan, which takes effect July 1:
Concern about infrastructure
Newsom’s plan to streamline California’s infrastructure-building process has been the most contentious policy proposal in budget negotiations.
The deal includes an amendment to the state’s signature California Environmental Quality Act by reducing the likelihood of long-term legal challenges for major infrastructure projects. The environmental law requires an assessment of potential environmental impacts before a project is approved, but is also used strategically by environmental organizations, project opponents, and others to destroy or alter construction projects.
Some environmentalists opposed the rushed nature of the governor’s plan, claiming that he was trying to weaken California’s environmental laws and protections without enough time for a policy review and public input.
Opponents of the controversial underground tunnel to transport water from the Sacramento-San Joaquin River Delta to Southern California emerged victorious from the budget compromise.
Kathryn Philips, former director of the Sierra Club, called Newsom’s proposal aecological nightmare“and said it would”decimating one of the largest estuaries in North America” last week.
Although Newsom and environmental groups often disagree, it is rare for Democrats in the Capitol to openly criticize the governor. Last week a bipartisan group of 10 lawmakers sent a letter to Newsom outlining their reasons for opposing the proposal, including that construction of the tunnel would have profound health and environmental impacts in three counties: Sacramento, San Joaquin, and Contra Costa.
Several other Democratic lawmakers publicly called out Newsom at legislative hearings for trying to ram such critical legislation through the budget process at the last minute.
In the end, Newsom agreed to remove the tunnel from the list of streamlined infrastructure projects, according to several sources involved in the negotiations. Lawmakers also successfully pushed for the final deal to require the state to try to mitigate impacts on underprivileged communities.
More money for healthcare providers
Doctors and other Medi-Cal providers have long argued that low reimbursement rates for services reduce access to care for nearly 16 million Californians, or one-third of the state’s population, covered by the state-subsidized health plan.
With the support of a broad coalition of physicians, community health centers, hospitals and unions, Newsom and lawmakers agreed to renew a tax on managed healthcare organizations known as the MCO tax to fund Medi-Cal at a time when the state expands the pool of fitness. The tax is expected to generate $19.4 billion in state revenue from 2023 through 2027.
The budget provides for the first reimbursement rate increases, in some cases in more than two decades, and has a faster timeline to spend the money than Newsom suggested in May.
Lawmakers and the governor have earmarked $2.7 billion annually from 2025 through 2029 for rate increases and other investments, including $1.65 billion for rate increases in primary care and specialty care. The deal also provides $555 million for emergency and inpatient care and $300 million for behavioral health beds.
While the deal represents a win for some providers, Senator Carolyn Menjivar (D-Panorama City) questioned why clinics serving the poorest communities were not consulted during the final negotiations.
“It was a little frustrating with how the MCO outage came about, or the final product of it, and who was involved in the conversations about who got a piece of the pie,” she said at a legislative hearing Monday night.
Slight reduction in future efforts to combat climate change
Newsom hyped the state’s $54 billion investment in climate programs last year, but suggested cutting it by $6 billion in May, when the shortfall became more apparent.
In the end, the Democrats compromised and agreed on $51.4 billion for climate programs.
The deal allocates more than $1 billion for coastal resilience and clean energy programs and restores nearly $300 million for the State Coastal Conservancy.
Funding for public transport restored
The final agreement ends the governor’s call for $2 billion in public transportation cuts after substantial lobbying by city transit agencies and Democratic lawmakers in San Francisco and Los Angeles. The deal includes a total of $5.1 billion for throughput over four years.
Ahead of possible future budget cuts, Democratic lawmakers on Monday introduced a separate plan to raise tolls on seven state bridges in the Bay Area by $1.50 to generate about $180 million annually between 2024 and 2028.
Money to fix up a prison
The deal Newsom struck with lawmakers will mark the beginning of his sweeping plan to revive San Quentin State Prison into a rehabilitation-focused facility and will formally begin the process of renaming it the San Quentin Rehabilitation Center.
Despite early backlash from lawmakers that outraged by Newsom’s proposaltogether with criticism from the independent Legislative Analyst’s Office that the plan lacked necessary details, the final budget includes what the governor was seeking: approximately $380 million to reconstruct certain parts of San Quentin. The plan will completely convert the prison into a Norwegian-style facility that focuses on job training and other programs to better prepare individuals for return in a way that reduces recidivism.
San Quentin’s transformation builds on Newsom’s multi-year initiative to overhaul the state’s criminal justice system, which he began in 2019 with an executive order temporarily halting the death penalty and closing the prison’s execution chamber.
The legislature also negotiated a deal with the administration that will give the state’s education and standards board more time to comply with part of a law passed in 2021 that established a decertification process for officers guilty of misconduct .
An increase in government funding for childcare
The current agreement represents a major win for low-income families who receive state aid to pay for child care.
Currently, families earning more than 40% of the state’s median income must pay a monthly fee for their child’s care on a sliding scale, ranging from $36 to nearly $600 — up to 10% of their income. For example, a family of four earning $6,950 per month would pay $518 in family contributions per month. Those fees were waived during the pandemic, but were set to restart on October 1.
The current budget agreement would waive benefits for all families earning less than 75% of the state’s median income, and limit all benefits to 1% of monthly income for families earning more.
However, the deal does not authorize the $1 billion rate increase for home care providers in 2023-2024 that the legislature is seeking. Instead, it authorizes a total of $2.8 billion to fund payment increases for all childcare and early childhood education providers over a two-year period. The details will be subject to ongoing collective bargaining with the Child Care Providers Union, which represents California’s 40,000 home care providers.
Staff writers Hannah Wiley and Jenny Gold and Sacramento Bureau Chief Laurel Rosenhall contributed to this report.
