Governor Gavin Newsom has signed off on a $262 billion budget for the state’s new fiscal year that starts on July 1. The plan is crammed full of spending for all kinds of programs, funded in part by federal COVID relief aid and an unexpected windfall in tax revenue from wealthy Californians.
KCRW looks over the new budget and what it means long-term with Katie Orr, a Sacramento-based politics reporter for KQED.
KCRW: The governor and legislative Democrats, who hold a supermajority, have called this a “transformative” budget. What do they mean by that?
Katie Orr: “This whole budget is really built around the idea from Democratic leaders of transforming the way the state is run, and lifting up people who might not be as fortunate.
I think the most direct example of that is the Golden State stimulus, which would provide $8 billion to eligible Californians in direct cash payments, as a way to help them recover financially from COVID.
But there are also programs like expanding Medi-Cal to eligible undocumented adults 50 and older.
There's an effort underway to implement universal transitional kindergarten throughout the state, which is a program for 4 year olds who aren't quite old enough to go into traditional kindergarten.
There is a massive expansion of California's social services to help lower-income people who need assistance.”
There’s also a big expansion in homelessness aid.
“Right, homelessness has been something that California has struggled with for a long time. But during the pandemic, when a lot of people lost their jobs and perhaps lost their housing, it became even more of a pressing issue. So in this budget, Governor Gavin Newsom and the state Legislature agreed to spend $12 billion over a two-year period to try to combat homelessness. That includes money that will go directly to local governments so that they can spend it where they see fit in their communities.”
Meanwhile, Governor Newsom’s opponents are trying to force him out of office via a recall election. Is the governor trying to win over voters with state spending?
“Newsom and the legislative Democrats certainly aren't making any secret of the fact that they want to make the state a more equitable place, and they are using the budget, and what they're funding through the budget, to help them get there.
The state is a majority Democratic state. And those kinds of issues are things that Democrats tend to support. So it would follow that they would be supportive of keeping him in office because they like what he's doing with this budget. It bolsters his case that he's the guy that should lead the state for the rest of his first term, and hopefully for him, into his second term.
But it does raise some questions about how much money California is spending. We’re in good financial times now, but that certainly won't always be the case.”
This budget sets up significant new programs. Can the state sustain those programs once the COVID relief funding is gone?
“Once the federal money is gone, I think the state believes its own tax revenues will still support these programs. Again, it got $75 billion in tax revenue it was not expecting this year. That’s because it relies so heavily on our top earners and how they do in the stock market.
But the stock market is volatile, and California’s tax base is notoriously volatile because it's tied to the stock market. And so to some extent, yes, I think lawmakers are taking a risk by putting in place all this ongoing spending and hoping they're able to sustain it in coming years.
A lot of these programs have money attached to them for two years going out, three years going out. But what happens in five years, six years, seven years? They don't know. They can make their projections, but it is possible if we see a significant recession [that] the state would have to cut back on some of these programs.”