In seeking to close a projected budget gap, Newsom presented a leaner budget Jan. 10 that contrasts markedly with recent years of economic expansion and increased spending. The budget cites continued high inflation, interest rate increases by federal reserve banks and stock market declines as reasons for the proposed reductions.
"This last risk is particularly important to California, as market-based compensation -- including stock options and bonus payments -- greatly influences the incomes of high-income Californians. Combined with a progressive income tax structure, this can have an outsized effect, both good and bad, on state revenues," the budget states.
By proposing cuts, Newsom is seeking to avoid dipping into the state's budget reserve. Instead, he is opting to delay some projects and nix others. The $297 billion budget proposes saving $7.4 billion by spreading out costs for certain projects that were set to receive funding in the coming year multiple years.
It would cut $5.7 billion from several planned programs, including a $3 billion to help the state address future inflation. It would also place numerous items in a "trigger" category, which conditions their funding on sufficient revenue being available later this year.
The "trigger" items, which total $3.9 billion, largely focus on climate and transportation programs, which together account for $3.1 billion in this category. Altogether, the proposed budget includes $48 billion for advancing the state's climate change goals, down from $54 billion in each of the last two budgets. This includes cutting $2.5 billion from a program that promotes conversion to zero-emission vehicles, though about $1.4 billion of this cut will be offset by shifts from cap-and-trade funds, according to the budget.
Funding for rail improvements will also be reduced in the 2023-2024 budget, with Newsom proposing to cut transportation spending in the general fund by $2.7 billion from 2022 levels.
The budget proposes investing $11.6 billion in transportation programs, down from $13.8 billion in 2022 (the reduction is partially offset by $500 million in additional funding from state transportation funds). Whereas Newsom had previously planned to spend $2 billion this year and $2 billion in 2024 on rail improvements, the new budget reduces the allocation to $1 billion and $500,000 in the two years, respectively.
The budget also proposes a delay of $350 million in funding for grade separation, the redesign of rail crossings so that train tracks would not intersect with roads. That money, initially slated to be available in 2023-24, was pushed to 2025-26.
"Given the multi-year nature of these types of projects, this shift should not significantly impact the ability to deliver the same number of originally planned projects that improve safety for people walking, biking, and driving at rail crossings," the budget states.
The budget proposal elicited a mixed response from Bay Area lawmakers, with some lauding Newsom for maintaining most of the funding in areas such as drought resilience, flood control and fire prevention and others criticizing him for failing to make larger investments in areas like public transportation.
State Sen. Josh Becker, who chairs the Senate Budget Committee's Subcommittee on Resources, Environmental Protection and Energy, said the proposed cuts and delays are "concerning at a time when we should be accelerating our work, not tapping the brake pedal."
Though he said he was pleased to see the budget maintain about 90% of the funding for these programs, relative to past budgets, he raised concerns about some of the specific budget reduction, including a proposed $550 million cut from programs to make the coastline more resilient. This includes elimination of the San Francisco Wetlands Support program and a $175 million reduction to the state's coastal protection and adaptation program.
"I am concerned about some of these cuts and delays," Becker (D-San Mateo) said. "Fortunately, in my new positions as chair of the budget subcommittee I will work on keeping the climate change agenda moving forward."
Becker also said he was pleased that the proposed budget generally protects his other key priorities, including an increase on per-pupil funding in K-12 education, investment in a universal preschool program and $30 million for the University of California system to offset the costs of replacing 902 spots for nonresident undergraduate students at three campuses with an equivalent number of California residents.
"We were able to generally protect our priorities," he said.
Assemblymember Marc Berman (D-Menlo Park) lauded the proposed budget for maintaining funding for addressing homelessness, including $3 billion for Project Homekey, which funds construction of transitional housing and conversion of hotels to support unhoused individuals.
"With additional funding we can continue to support our neighbors experiencing homelessness and transition them into permanent stable housing," Berman said in a statement.
He also said he was grateful that the budget increases funding for levees and other flood-protections efforts, investments that he called "timely and essential as my constituents face the reality of more devastating storms on the horizon while they are still recovering from the damage of the last ten days." The budget proposes adding $135.5 million over the next two years to support agencies by local agencies on urban flood risk.
"Unpredictable and extreme weather is only going to become more commonplace and California must do more to protect our residents and our communities," Berman said in a statement.
Newsom's proposal to cut funding for transportation elicited a sharp rebuke from State Sen. Scott Wiener, who noted in a statement that public transportation systems are reeling from lower ridership as a result of the pandemic.
The state, he said in a statement, "must not let our public transportation systems go over the impending fiscal cliff and enter a death spiral -- where budget shortfalls lead to service cuts that lead to ridership drops that lead to further budget shortfalls and service cuts."
"Unfortunately, the Governor's proposed budget does not address the transit fiscal cliff; instead it cuts and defers transit capital funds, which will make it even harder for these systems to meet future needs, including California's climate goals," Wiener (D-San Francisco) said in a statement.