What Gavin Newsom’s $222 billion budget says about California’s priorities

In Summary

Homelessness, education, climate action, health, consumer protection, school lunches: Gov. Gavin Newsom's agenda couldn't differ more from President Donald Trump's.

Stoked with liberal ideas, flush with another surplus, California in the Newsom era is getting the agenda America might have had, had America not elected President Donald Trump. As Gov. Gavin Newsom on Friday unveiled his initial $222.2 billion budget proposal for next year, the priorities read like an extension of yet another Barack Obama — or maybe a first Hillary Clinton — administration: Public schools. Homelessness. Climate action. Consumer protection. School lunches. Affordable health care, even for undocumented people. Newsom even talked about maybe closing a prison soon.

Enough with the dark national stories about California being a mess, said Newsom, who started his presentation with a sunny reality check.

Pitching state legislators, who determine appropriations, the Democratic governor did some paddling to the right, as Jerry Brown would have put it: There was a tax cut idea for small business owners. And proposals to pay down debt and pension obligations and build budget reserves got positive reviews even from the handful of Republican lawmakers left in the Capitol. And he paddled to the anti-Trump left, lashing out at Trump’s California heckling: “He’s tweeting, we’re doing something,” Newsom said.

This first budget ask is just the start of a long negotiation. And a number of potentially contentious issues — tax hikes, for example — were pointedly not on it. But these presentations do serve as a guide to what matters in an administration. Here are this one’s key takeaways:

Gov. Gavin Newsom presents the 2020-21 state budget at a press conference at the California Capitol on January 10, 2020. Photo by Anne Wernikoff for CalMatters
Gov. Gavin Newsom touts the state’s economic health as he presents the 2020-21 state budget at the California Capitol on January 10, 2020. Photo by Anne Wernikoff for CalMatters

We’re over “California derangement syndrome”

Enough with the dark national stories about California being a mess, said Newsom, who started his presentation with a sunny reality check: record low unemployment of 3.9%, 117 months of consecutive job growth, an average of 3.8% economic growth over the last five years, a $19 billion rainy day fund with millions more tucked away in other pots of savings. The governor and lawmakers will be able to fund homeless, health care and education initiatives through a $5.6 billion surplus.

The governor held up the state in direct contrast to Trump, who criticizes Newsom’s response to California’s homeless crisis. Why dignify “California derangement syndrome,” as Newsom calls it, or rise to Trump’s Twitter bait?

“If I’m not willing to stand up to a bully,” Newsom said, “if I’m not willing to stand up to someone who is attacking immigrant communities and refugees and attacking people working very hard every single day to feed their families, then I don’t belong here.”

Homelessness is a defining issue

Calling homelessness “the issue that defines our times,” Newsom asked for $1.4 billion for homeless services with a focus on getting money out fast for emergency rental assistance and board-and-care facilities for the mentally ill.

He also directed state agencies to review public property that can be converted to emergency housing, and to deploy 100 camp trailers from the state fleet to use as temporary shelters. The proposals come on top of $1 billion allocated last year to keep people off the streets. 

The governor also stood by his decision not to name a homelessness czar. “You want to know who’s the homeless czar is? I’m the homeless czar,” Newsom said.

He declined to say whether the state should guarantee a “right to housing,” a policy being pushed by some Democrats as a tool for hastening action. Assemblywoman Autumn Burke has introduced a “right to housing bill” for homeless families. 

What about building more homes? 

The Newsom administration says the state has secured $4.5 billion in commitments — including loans and land — from tech companies Google, Apple and Facebook to support affordable housing. 

But the budget offered few new policy changes to make it easier for developers to build, except to say the administration is exploring the creation of a new agency on housing and homelessness. During his gubernatorial campaign, Newsom set a goal for the building of 3.5 million new homes. 

We need teachers in low-income schools

The governor is pitching a $100 million grant program to offer $20,000 stipends to teachers who agree to work in low-income schools for at least four years. The effort, Newsom says, addresses this sobering statistic: California schools with high concentrations of students in poverty have three times as many underprepared teachers.

The governor is pitching $20,000 stipends to teachers who agree to work in low-income schools for at least four years.

Calling the state of special education in California “a crisis,” the governor proposed $895 million in services for students with disabilities, with an emphasis on early intervention and screening for preschoolers. An additional $4 million would go toward dyslexia research – a soft spot for a governor who, himself, grew up dyslexic.

Newsom’s $84 billion K-12 budget also steers $900 million toward teacher recruitment and retention in low-income schools that chronically have difficulty in hiring and keeping qualified educators. 

School lunches? Tasty but healthy

About those cafeteria frozen pizzas and burritos: The state would direct $70 million toward improving nutrition in school meals – a proposal lobbied by First Partner Jen Siebel Newsom. Siebel Newsom, who worked on the proposal with Kat Steyer, took a page out of the playbook of former First Lady Michelle Obama, who put her stamp on the White House focusing on school nutrition.

Newsom lamented “those damn headlines coming from Betsy DeVos and the Trump administration rolling back the good work” of the Obamas. “Rather than complaining about it, we’re going to do something about,” he said.

Preschool for all? A work in progress

Newsom made early childhood education a priority in his inaugural budget. His sophomore proposal builds on a goal of preschool for all. He wants $8.5 million to seed a new state office — the Department of Early Childhood Development — to simplify California’s complex system of childcare funding.

The budget also calls for nearly $32 million to fund an additional 10,000 in the state’s subsidized preschool program for low-income families. Issues of pay for child care workers and preschool teachers were left out for a second year. 

We’re worried about a skilled work force

Newsom’s higher education proposals focus on workforce training, with $83 million to fund apprenticeships and $17 million for a pilot project to help Central Valley residents earn degrees in fields with local shortages such as accounting, teaching, and nursing.  “If we can prove it works in Fresno, then we go to the Central Coast, Inland California and…the North Coast,” the governor said.

The University of California and California State University would each get a 5% spending boost to enroll and graduate more students. Community colleges would receive an additional $409 million, including money to improve faculty diversity, reduce textbook costs, build food pantries, provide legal services to immigrant students and expand programs that allow students to earn a high school diploma and associate’s degree at the same time.

Newsom would also add $21.6 million to an initiative he championed last year that provides student parents with more financial aid for living expenses, and set up a $5 million task force to brainstorm ways to help Californians struggling with student debt.

For undocumented, health care but not tax credits

Newsom is still resisting a proposal to extend the state’s earned income tax credit to undocumented workers who file taxes. That idea that was quietly dropped during final budget negotiations last spring. But he is willing to extend health coverage to an estimated 27,000 undocumented seniors over the age of 65 at a cost of $64.2 million a year through the state’s Medicaid program, known as Medi-Cal.

The expansion pushes California toward universal coverage. Gov. Jerry Brown first extended Medi-Cal to children regardless of immigration status and the state has since expanded coverage to undocumented young adults. But Newsom signaled restraint, saying offering Medi-Cal to all undocumented residents would be too pricey at this point. 

Talk of a mystery state park

The budget calls out $20 million for a new, unidentified, park. Speculation has focused on an 80-square-mile swath of land known as N3 Ranch that spans parts of Alameda, Santa Clara, San Joaquin and Stanislaus counties. 

Newsom declined to name the exact location saying that identifying it would drive up the price to obtain the property. The governor is asking for $65 million for the Parks for All initiative, which aims to expand the state parks system. 

No climate change rollback

Newsom continued to leverage California’s pocketbook against climate change, asking for $12.5 billion over five years to boost climate resilience, curb greenhouse gas pollution, and tackle the state’s wildfire crisis. That includes $1 billion over four years for a new program called the Climate Catalyst Fund, which would provide low-interest loans for emerging technologies and projects aimed at greening parts of California’s economy — especially agriculture, recycling, and transportation. 

Newsom wants to continue to leverage California’s pocketbook against climate change with $12.5 billion over five years to boost climate resilience, curb greenhouse gas pollution, and tackle the state’s wildfire crisis. 

The governor proposes to help communities address the daunting, complex, and highly expensive task of girding for sea level rise, flooding and wildfires via a $4.75 billion climate resilience bond on the November ballot. His budget continues California’s fight against the Trump administration — specifically calling out federal rollbacks to clean air and greenhouse gas standards. Newsom proposes setting aside $2.7 million for an Air Resources Board special fund that would increase regulations curbing air toxins from heavy industry and businesses.  

Wildfires and firefighters matter

Addressing the state’s wildfire crisis, the budget earmarks builds on the nearly $1 billion earmarked last year, adding more sophisticated fire prediction and monitoring, continued fire prevention efforts and spending to create statewide guidelines for emergency fire response.

Newsom wants about $90 million to harness technology in wildfire response, a high priority for CalFire, the state’s firefighting agency, which will receive funding for 677 new positions in the next five years. Newsom also is asking for money to fund research into the health impacts of firefighting on first responders.

Governor Dad is still pushing a ‘parents agenda’

The parents of four young children, Newsom and his wife Jennifer Siebel Newsom frequently say they’re pushing a “parents’ agenda” to make life easier on California families. This budget would extend a tax break on diapers and tampons until July 2023, and support a law allowing more workers to take paid family leave by guaranteeing they can come back to their jobs.

Many workers don’t take leave to care for a new baby or a sick family member because they can’t afford to get by on partial salary, or could lose their jobs if they do. Currently, the program replaces 60% to 70% of a workers’ wages. Companies that have fewer than 20 employees do not have to guarantee workers they’ll have a job after a leave. 

Democratic Sen. Hannah-Beth Jackson has been trying for years to pass a job protection law, but has been thwarted by the California Chamber of Commerce, which has lobbied against the idea as a “job killer” that could create more litigation against businesses.

Bold moves to lower health care costs

California could become the first state to establish its own generic drug label, leveraging the state’s massive market to increase competition and lower generic drug prices. Generic drug makers counter that drug costs are being driven up by brand name drugs. 

Newsom’s budget also would continue to push to establish a single market for drug pricing, direct the state to ask for more rebates from drug manufacturers, and open a new Office of Health Care Affordability in the spring to improve price transparency and look for ways to reduce health costs.  

Time for a tax on vaping?

Calling it a “long overdue” tax on vape cartridges, Newsom is proposing a $2 levy on each 40 milligrams of nicotine. It’s the same idea behind a new bill from Sen. Jerry Hill intended to ban flavored tobacco. 

Proponents say taxing flavored tobacco is another step in trying to stop the sale of vaping products, especially to kids. Between 2017 and 2018, the Centers for Disease Control and Prevention found that the use of any tobacco product increased 38.3% among high school students.

While offering no specifics, Newsom vowed to re-examine the 1967 Lanterman-Petris-Short Act, which limits the authority of government officials to detain mentally ill people.

Last year several bills intended to tame tobacco sales, especially those aimed at kids, were stalled or gutted with lobbying from tobacco and vaping companies, such as JUUL.

How we treat mentally ill people could be changing

While offering no specifics, Newsom vowed to re-examine the 1967 Lanterman-Petris-Short Act, which limits the authority of government officials to detain mentally ill people. Civil libertarians have fought any changes, contending people should not be detained unless they are clearly a danger to themselves or others. “The act was conceived when I was conceived,” Newsom said. “The world has changed.”

The governor mused that while there might be a need to construct more facilities to care for such people, treatment should be done at the community level. And he’s promising to get tough on health plans to provide equal treatment on mental and health needs. 

We’re ready to discuss closing a state prison

Newsom’s budget says that if the inmate population continues to decline, he will close a state-operated prison within the next five years, a sharp turnaround from the 1980s and 1990s when California went on a prison building spree.

Prison population has fallen by 50,000 inmates to 124,000 from its height of 174,000. But even with population decreases, Newsom’s proposes to increase spending on corrections to $13.4 billion from $12.7 billion in the current year.

Small business relief, consumer protection

Newsom is proposing to exempt small businesses from an $800 minimum franchise tax in their first year. Currently, corporations enjoy a first-year exemption. The change is expected to provide limited liability companies, limited partnerships and limited liability partnerships around $100 million a year in tax relief.

The state is also creating its own version of the federal Consumer Financial Protection Bureau, which has been rolled back under the Trump administration. Newsom will rename the state’s Department of Business Oversight to the Department of Financial Protection and Innovation and provide consumer protection to unfair practices. 

We’d like to stop killing stray pets

California wants to become a ‘no kill’ state in 5 years, a goal that could save countless pets. Newsom proposes giving $50 million to the UC Davis Koret Shelter Medicine Program to train 100 animal shelters on alternatives to euthanization. Newsom says it’s an issue close to his family.

No letup on long-term liabilities

Despite surplus and rainy day funds, California faces massive long-term liabilities. The state faces $250 billion in pension and retirement health liabilities for teachers and state workers. Newsom’s budget would continue chipping away.

This report was written by Judy Lin and compiled by the CalMatters staff.

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