Governor Newsom Signs FY 2020-2021 State Budget
Governor Newsom has signed the FY 2020-2021 California State Budget, totaling $215 Billion. Click here to read the below LA Times article by John Myers, published June 27, 2019.
California Gov. Gavin Newsom has signed his first budget. Here’s where the $215 billion will go.
California will increase its spending on public education, expand healthcare services and stash away more money than ever for an economic downturn under the state budget signed Thursday by Gov. Gavin Newsom — a plan that was stalled for two weeks over how it would address the state’s growing housing crisis.
The $214.8-billion budget is the largest in state history. The majority of its provisions take effect next week, though some new services won’t be funded until January in an effort to lower the short-term cost. Click here to continue reading.
Budget Highlights BizFed Advocated For
1. Safe and Affordable Drinking Water Fund – Responding to Governor Newsom’s original plan to tax residential, commercial and agricultural water users to raise $140 million to clean up drinking water, BizFed supported AB 100 (Assembly Budget Committee) which created the Safe and Affordable Drinking Water Fund.
Unfortunately, this trailer bill wasn’t vetted sufficiently to make yesterday’s deadline. Instead, the legislature will move this forward next week as an amended stand alone urgency bill. The goals are to allocate $130 million from the Greenhouse Gas Reduction Fund for the cleaning of drinking water in disadvantaged communities.
2. Emergency Response Funding – BizFed, a member of the Action for Wildfire Resiliency coalition advocated for increased investment in emergency response, which was reflected in the budget. The state budget includes approximately $184 million for emergency response. This includes:
· $75 million for state and local agencies when utilities have to de-energize electrical lines using Public Safety Power Shut-off protocols during red flag weather warnings;
· $25 million ongoing for the state’s mutual aid system;
· Approximately $60 million to build a statewide public safety radio system;
· $16.3 million for the final phase of the build-out for the California Earthquake Early Warning System; and
· $7.5 million to support disaster preparedness efforts.
3. Transportation Funding – In 2017, BizFed and our membership took a controversial stance to support SB 1 (Beall) to protect our transportation funding which is reflected in this year’s budget.
The state budget allocates $4.8 billion for transportation generated by SB 1 (Beall, Chapter 5, Statutes of 2017) in FY 2019–20, with funding distributed from the Road Maintenance and Rehabilitation Account to the following state and local programs:
· $1.2 billion for local streets and roads, including $600 million for cities and $600 million for counties;
· $458 million for local transit operations;
· $386 million for transit, commuter, and intercity rail;
· $200 million for the State-Local Partnership Program;
· $100 million for the Active Transportation Program;
· $36 million for Commuter Rail and Intercity Rail; and
· $25 million for Local Planning Grants.
· $1.2 billion for maintenance of the state highway system known as the State Highway Operation and Protection Program;
· $400 million for bridges and culverts;
· $307 million for trade corridor enhancements; and
· $250 million for commuter corridors
Other Budget Highlights
1. Conforming to Certain Aspects of the Federal Tax Code – Governor Newsom and the Legislature used what they named the “Loophole Closure and Small Business and Working Families Tax Relief Act of 2019,” (AB 91 – Burke, Ting & Quirk) as a vehicle to conform to certain aspects of the federal Tax Cuts and Jobs Acts of 2017. The following limitations were enacted:
· Limiting the ability of partnerships to deduct business losses.
· Denying corporations, the ability to deduct executive pay in excess of $1 million a year.
· Restricting the ability of businesses to deduct employees’ meals, entertainment and membership dues.
The Governor and Legislature estimate that the business community will pay an additional $1.7 billion in taxes to increase and expand the California Earned Income Tax Credit. In addition, the revenue generated by this bill is estimated to provide an additional $1 billion total to schools through an increased Prop. 98 minimum funding level.
2. Paying Down Public Employees Retirement Debt – On the heels of the defeat of Measure EE, LAUSD parcel tax, the Governor’s recent action helped reduce public employee pension/retirement liability. SB 90 (Committee on Budget and Fiscal Review) specifically:
· Appropriates $2.5 billion from the General Fund to be transferred to the Public Employees’ Retirement Fund.
· Appropriates $904 million General Fund in 2018–19 to be transferred to the Public Employees’ Retirement Fund for payments relating to school employers’ contributions and unfunded liabilities
· Appropriates $2.25 billion from the General Fund to the Teachers’ Retirement Fund for the Defined Benefit Program.
· Appropriates a total of $2.9 billion Prop. 2 Funds in 2019–20 through 2022–23 to pay down the state share of the CalSTRS unfunded liability.
3. Preparing for a Future Recession – With a potential recession looming over California, Governor Newsom has taken some great strides to prepare for a future recession. Under Governor Newsom’s budget deal, California is projected to build up budget reserves to more than $19 billion by the end of the 2019-20 fiscal year. Of that, $16.5 billion will be set aside for our so-called “rainy day” fund, which can only be used in a recession. The rest of the funds will be divided up between three other funds related to social services, education, and emergencies & natural disasters.