California budget calls for $15 billion in economic relief

SACRAMENTO — California Gov. Gavin Newsom on Friday released a plan calling for $15 billion in economic relief for Californians as part of his $227 billion plan as the state confronts a surge of coronavirus cases and deaths.

As he pressed for lawmakers to act quickly on $5 billion in “emergency funding" for five priorities: $2 billion for reopening schools, boosting coronavirus vaccine spending, $735 million in small business grants and fee waivers and $2.4 billion to give $600 cash payments to roughly 4 million people.

The money comes from surging tax revenues despite the pandemic, as California's richest continue to prosper and lower-income people are hit hardest from job losses.

The state faces “a challenge the likes of which we never expected," Newsom said. “Our numbers changed, but our values did not."

On vaccines, he said his focus is “getting (them) out of the freezers and administering into people’s arms" to reopen in-person teaching and businesses.

He rebuffed the notion that the state is taking too much time deliberating the vaccination process, noting that a state panel this weekend gave local officials more flexibility about who should get them.

There is also what the governor's office called the highest funding level yet for K-14 schools: $90 billion, much of which is based on a required calculation.

Newsom’s budget proposal is a remarkable turnaround from earlier projections. Last year, Newsom and state lawmakers approved a budget with deep spending cuts to cover an estimated $54.3 billion shortfall. But that shortfall didn’t happen, leaving the state with much more money to spend this year than it had expected.

Since California’s progressive tax structure relies mostly on wealthy earners, the pandemic has led to a strange contrast in the nation’s most populous state: Many people who earn more than $60,000 per year have been able to keep their jobs because they can work from home.

That has led the state to collect $74.4 billion in taxes, or $13.7 billion more than it had anticipated.

But the employment rate for people who earn less than $27,000 per year — including restaurant and retail workers — has dropped nearly 27% since January, according to data from Opportunity Insights at Harvard University.

California Republican Party Chairwoman Jessica Millan Patterson said in a statement that Newsom should use the one-time surplus to help the most vulnerable.

“His shutdowns and lack of leadership in handling COVID-19, has put many Californians in dire situations — foreclosures, evictions, isolation from family and friends, and a lost academic year for millions of school children," she said.

Democrats largely praised the plan.

“Despite the tough year we just had, responsible budgeting has left us in a good position to invest in what’s most important to Californians,” said Sen. Bill Dodd, a Democrat. “Right now, that means supporting a robust public health system faced with an unprecedented challenge and help for small businesses struggling to hang on."

In addition to the $90 billion for schools, the governor predicted California will get another $6.7 billion in additional federal funding once President-elect Joe Biden takes office.

He has already said he wants to give schools $2 billion to help pay for testing, ventilation and personal protective equipment as he seeks a return to in-person instruction, for which he has received lukewarm support from teachers unions and school districts.

Public education, which makes up about 40% of California's budget, takes on added urgency after the state last year deferred more than $12 billion in spending for public schools. The deferral meant school districts had permission to spend the money, but the state would pay them back in future years. Many had to borrow or dip into their reserves to cover it.

“The first objective is to get out from underneath this record level of borrowing from schools,” said Kevin Gordon, a lobbyist who represents public school districts.

Homelessness, which has previously been a focus for his administration, would get $1.7 billion in fresh investments for housing the homeless, building on a plan last year called Project Roomkey and Project Homekey.

“Because it worked we might as well double down on it,” he said.

Newsom's proposal is just the first step in the budget process. Lawmakers must still vet his ideas and vote on them, a process that usually isn't completed until mid-June so the budget can take effect July 1. This year, Newsom is asking lawmakers to act earlier on some of his proposals.

Legislative leaders have pledged to act quickly, but it's unclear when that might happen. Lawmakers are scheduled to reconvene on Monday.

Health care spending also takes on even more importance this year as hospitals are overwhelmed with virus patients. Carmela Coyle, president and CEO of the California Hospital Association, said she will be watching closely.

“This should be a budget that leaves the health care delivery system, hospitals especially, untouched,” she said.

The state Legislative Analyst had predicted the windfall would be around $26 billion. But Newsom believes the state constitution requires him to set aside $4.5 billion in California’s reserve fund. The state’s rainy day fund for economic uncertainties will rise to $15.6 billion, while its overall reserves climb to $22 billion.

Newsom called for the creation of a “Housing Accountability Unit” to speed up housing creation by forcing local governments to meet production goals, building off a 2019 lawsuit against the city of Huntington Beach for failing to add state-required low-income housing to its city housing plan. The funding would help monitor local planning meetings.

“We’re not going to wait for an article to be written to be proactive in terms of holding local government accountable to increasing housing production,” he said.

“Instead of creating a commission to oversee a plan by a committee yadda yadda - speaking as someone in the actual housing business, a Governor needs to get shovels in the ground, hammers swinging, and projects fast-tracked,” businessman John Cox, a Republican who challenged Newsom in 2018 and plans to run again in 2020, posted on Twitter.