Winners and losers in Newsom’s California budget deficit plan

What are the big takeaways from Gov. Gavin Newsom’s updated 2023-24 budget proposal, the so-called May revise?

The impact of climate change. Fiscal restraint with a looming recession. And almost certainly, no tax increases to cover the growing budget deficit.

The spending plan Newsom unveiled Friday anticipates a $31.5 billion deficit, up from $22.5 billion projected in his January proposal. He calls for spending $306 billion, which is just 1% less than the record $308 billion budgeted for this year, and he seeks to protect the state’s continued investments in some programs, such as in housing and health care, while stopping short of adding any costly new initiatives.

• Newsom: “We have a $31.5 billion challenge, which is well within the margin of expectation and well within our capacity to address…. Right now, we’re able to submit a budget that we think is prudent and it’s balanced.”

On Saturday, the independent Legislative Analyst’s Office said that due to the “muddy” economic outlook, its revenue estimates are $11 billion lower than the governor’s and adopting Newsom’s would “present considerable downside risk.”

For more details about Newsom’s spending plan, get the full analysis from the CalMatters’ team. Here’s a quick rundown on some of the budget’s biggest winners and losers:

Winners

Dyslexia screening backers: As someone who struggles with dyslexia himself, Newsom added $1 million for teacher training and a requirement for dyslexia screening, despite pushback from the California Teachers Association. Sen. Anthony Portantino, a Glendale Democrat who authored the bill to screen for dyslexia and also has dyslexia, celebrated the news.

• Portantino, to EdSource: “This is a great day for kids in California. The governor had it right. He and I both understand the urgency of this issue.”

Foster youth advocates: Newsom restored $20 million to the Court Appointed Special Advocates program for 2023-24, which advocates for foster youth and supports about 16% of California’s foster population. An additional $20 million in funding is planned for 2024-25 as well.

Flood protection supporters: An additional $290 million to the flood control budget brings the total that Newsom proposes to invest in flood protection to $492 million.

Public health agencies: Newsom restored $50 million for public health workforce training programs that were cut in his January proposal.

Losers

Climate programs: In January, Newsom slashed $6 billion from the $54 billion five-year climate package. His May proposal put another $1.1 billion for climate resilience programs in jeopardy if a “climate bond” isn’t approved.

• Sen. Josh Becker, a Menlo Park Democrat, in a statement: “I am worried about the state’s ability to meet its climate targets with the current levels of investment.”

Child care providers: On top of delaying funds for 20,000 of next year’s new child care slots, which Newsom proposed in January, his May revise provides only an 8% cost-of-living raise, compared to providers’ requests for a 25% increase in reimbursement rates.

Public transit systems: Despite pleas from local agencies, Newsom unveiled no aid as they face a dire “fiscal cliff.”

School arts programs: Newsom slashed proposed grants for arts, music and instructional materials from $2.3 billion in his January proposal to $1.8 billion.

Prison towns residents: Newsom cut the California Department of Corrections and Rehabilitation budget by more than $100 million and he’s moving forward with closing correctional facilities in Blythe and California City by 2025.

Struggling hospitals: Hospitals did not get the $1.5 billion in immediate relief they had been seeking. But Newsom did allocate $150 million to establish a loan program for distressed hospitals, and on Monday signed the necessary legislation.

Keep in mind the governor’s proposal isn’t the end. Rather, it kicks off nearly a month-long negotiation with the Legislature, which has until June 15 to pass the budget in order to get paid.

More CalMatters honors: CalMatters stories are winning more recognition — this time for TV collaborations with CBS Sacramento. A version of the award-winning series on wage theft by CalMatters’ California Divide team won first place in business and consumer reporting from the national Headliner Awards and is also up for a Northern California Emmy award. Another award-winning series — “Trial by Fire,” on post-traumatic stress among firefighters — has also been nominated for a regional Emmy. Winners will be announced June 3. Read more from our engagement team.

Other Stories You Should Know

1 Declining population = affordable housing?

As residents continue to leave the state in droves, does that mean affordable housing is becoming less of a pipe dream in California?

As CalMatters’ housing reporter Ben Christopher explains: It’s complicated, but likely still no.

For the years during and after the peak of the pandemic, news media and research organizations repeatedly reported on California’s “mass exodus.” This marks the third consecutive year that the state’s population dipped from the year before.

At the same time, data from the state’s finance department shows California is building homes at a faster rate than any time since the Great Recession. For the first time since at least 1991, there are now more homes per person — 3,770 units for every 10,000 Californians.

But even if both trends continue, the state is still a long ways away from solving its housing shortage. For one thing, because there’s no single definition of what constitutes a “housing shortage,” it’s not clear how many more homes the state would need to build, or how many more people would need to leave, to reach a point where the majority of working and middle class residents can afford to rent or buy a place to live.

The pandemic, which caused some residents to move out of state, also made housing in California more scarce. To avoid contracting COVID-19 and find more space while working from home, Californians ditched their roommates to live on their own, leading to a great “spreading out.”

As for the remaining 38 million who have stuck around, California still falls short of building enough housing to accommodate its population in the next few years. Researchers also argue that banking on people leaving the state shouldn’t be the way out of the housing crunch.

• Hans Johnson, Public Policy Institute of California researcher: “I don’t think any of us who have been advocating for building more housing in California — to help alleviate the shortage of housing we’ve had and to improve affordability in the state — thought that the best path was just to have the state start to depopulate.”

2 Meet Assemblymember Stephanie Nguyen

Continuing my interview series with first-term legislators, I sat down with Assemblymember Stephanie Nguyen, an Elk Grove Democrat. After her parents fled Vietnam during the war, Nguyen was born in Louisiana and moved to Sacramento when she was five. 

Nguyen went on to lead a nonprofit and served on the Elk Grove City Council in 2018. Encouraged by then-Assemblymember Jim Cooper to run for his seat, Nguyen won last year. 

We sat down to discuss how her background and family influence her, her thoughts on Gov. Newsom’s battle with oil companies and more. Below are our conversation highlights, condensed for clarity and length.

What part of your upbringing do you feel most impacts what policies you prioritize?

We grew up in very low-income housing, with very little money. But I never knew I struggled. My parents would always remind us what it was like in Vietnam. They would remind us all the time how fortunate we were. It wasn’t until I got older that I realized that we weren’t as fortunate as everybody else, that we were poor and that we lacked a lot of resources and services. That helped me get more involved in the community.

Oil interests contributed nearly $1 million to your campaign. In March, you voted to advance Newsom’s proposal that could potentially cap oil industry profits. What was that like, and was there any fallout?

I did not get any blowback from the oil companies, or anybody for that matter. My concern is that our low-income communities that aren’t able to pay for gas, to be able to go to work, or to be able to go out and about and do what they need to do. I had the opportunity to meet with the governor and I did share my concerns.

Your husband is a police officer. After George Floyd’s death in 2020, how do you feel about those who seek police reform in California?

There are a lot of police officers that don’t like those that make them all look bad. There are police officers that wish that we could change the way things are done, but not to the point where it takes away their ability to do their job and keep us safe. I’m not going to speak for law enforcement, I’m not wearing the uniform. 

In January there were two mass shootings in California where the shooter and most of the victims were Asian. Do you feel there’s anything you can do to prevent this again?

What we’re learning now is that it’s a real thing that our API community has mental health issues that have been sitting there for decades. Gun legislation is something that we all talk about here. It doesn’t help that somebody can drive over to another state and be able to purchase what they need and bring it back here into our state.

What’s one thing the public or your friends and family misunderstand about your job?
That I just sit in the office and go to fun things all day long. I think people think that we just take junkets and we go on trips. I try to make it to a lot of the receptions that happen at night, but I leave here and I go to Taco Bell and my dinner is two crunchy tacos, a nachos BellGrande and a bean burrito every night. Because when you get home, that’s the only thing that’s open late at night.

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