Governor Newsom released the May Revision to his proposed 2023-2024 State Budget, which now totals $306.5 billion. The May-Revise anticipates a larger deficit than the $22.5 billion previously projected in January. After two years of historic budget surpluses, this budget now anticipates a $31.5 billion deficit. The Governor highlighted many uncertainties that will require the state to maintain prudence, including the federal debt ceiling impasse, delayed tax receipts, rising interest rates and still the potential for a recession.
In January, the Governor proposed delaying or shifting some spending commitments in addition to “trigger” cuts that would be reversed in the future if revenue projections changed. These trigger cuts are largely focused on climate and transportation. The May-Revise does not include any new trigger cuts, though still maintains the previous trigger proposals, in addition to new fund shifts, borrowing from special funds and tapping the state’s safety net reserve.
We are still reviewing the details but wanted to share a few items in the May-Revise that we think will be of interest to planners. Specifically, the May-Revise:
Housing and Homelessness
- Continues to include $3.7 billion in funding for homelessness programs, as committed in previous budgets, including $1 billion for the Homeless Housing, Assistance and Prevention Program (HHAP).
- The Administration is continuing to engage the Legislature in discussions about enhancing local accountability around homeless services and enhancing regional coordination on homelessness strategies. It is expected that such accountability measures will be tied to this new HHAP funding.
- During the press conference, the also Governor noted that he has not endorsed a particular bill related to accountability yet because there are so many proposals that were introduced. Instead, he will be watching to see which bills continue to move and will engage with the Legislature.
- Continues to include $17.5 million in General Fund reductions and $345 million in deferrals related to housing programs.
Climate
- Continues to prioritize the state’s climate agenda and maintains approximately $48 billion (89 percent) of climate investments allocated in previous budgets.
- States the Administration’s commitment to supporting additional resources to engaging the Legislature in pursuing a climate bond over the coming months.
Mention of a New Infrastructure Permit Streamlining Proposal: Noted in his press conference, the Governor will be releasing a permitting reform proposal for clean energy and other infrastructure projects. When asked if this would also include much discussed CEQA reform, the Governor said more information will be available next week. That said, it doesn’t sound like this streamlining will be focused on CEQA or local permitting.
Next Steps
Discussions on the May-Revise will continue between the Administration and the Legislature, budget trailer bill language to implement specifics in the proposed budget will be published online and budget subcommittees will continue to hold hearings on these proposals. The final budget must be passed by June 15 and budget trailer bills must be passed by the end of session on September 14.