California Budget Challenge 2019

March 8, 2019

The state has a new Governor and a large budget surplus in 2019-20 of over $22 billion due to higher-than-expected revenues and continued economic growth. The challenge continues to have shifted from mitigating deep program cuts and tax increases to making choices around the priorities that will keep California moving in a positive direction.

Governor Newsom released his first proposed budget, and he dedicates about half of the surplus to paying down the state's liabilities and building up reserves for an eventual economic downturn. By the time the fiscal year starts on July 1, 2019, the nation will have experienced 10 straight years of economic expansion—matching the longest economic expansion in modern history—and the Rainy Day Fund will have $15.3 billion by the end of the 2019-20 fiscal year under status quo.

The proposed budget also includes new investments in early childhood education, housing, health care, reducing poverty, and emergency preparedness, among others. There is about $11 billion in new spending, including approximately $8 billion one-time and $3 billion in ongoing spending.

New options this year include:

  • $3 billion supplemental payment to pay down some of the state's share of unfunded liabilities in CalPERS
  • Funding for universal preschool for all income-eligible four-year-old children in the state, phased in over a three-year period
  • $500 million one-time General Fund to build child care infrastructure, including investing in the education of the child care workforce, and $750 million one-time to address barriers to full-day kindergarten
  • Creates a new "Cost of Living Refund" (formerly proposed as the "Working Families Tax Credit") that expands the California Earned Income Tax Credit (CalEITC) to those making $30,000 a year or less regardless of the number of dependents and adds a new $500 child tax credit for every child under the age of 6 in a family eligible for the CalEITC
  • Expand the Affordable Care Act by increasing subsidies to ensure that more low- and middle-class Californians can afford health coverage through Covered California, and makes progress in providing universal coverage by expanding Medi-Cal to approximately 138,000 young adults age 19 through 25 regardless of immigration status
  • First two years free tuition for first-time, full-time students at California Community Colleges
  • $300 million ongoing General Fund for operational costs, increased enrollment, and for continued progress toward the equity goals of the Graduation Initiative 2025 at CSU
  • $240 million ongoing General Fund for operational costs; student success, student hunger and housing initiatives; ongoing support for graduate medical education; and mental health resources at UC
  • Raising the maximum CalWORKs grant to $888 per month, or 50% of federal poverty level (FPL), up from the current 42% FPL
  • $750 million one-time to local governments to spur housing development and $500 million one-time for emergency shelters and navigation centers
  • $200 million to augment CalFire's firefighting capabilities, including adding 13 additional year-round engines, replacing Vietnam War-era helicopters, deploying new large air tankers, and investing in technology and data analytics that will support CalFire’s incident command in developing more effective initial fire suppression strategies
  • $214 million toward forest management to increase fire prevention and complete additional fuel reduction projects, including increased prescribed fire crews.

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