Let’s make a deal: Legislative leaders make California budget offer to Newsom

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Still yet to strike a budget deal with Gov. Gavin Newsom, legislative Democrats have put their own spending priorities into a bill that they plan to pass this week ahead of a critical deadline.

The proposal, which was published online late Sunday, represents an agreement between the Democratic caucuses of the state Senate and Assembly, both of which hold supermajorities and can pass any measure without Republican support. The Legislature is constitutionally required to approve a balanced budget by Thursday to get paid. The Assembly and Senate approved the budget bill on Thursday morning, over Republican objections.

But negotiations are ongoing with Newsom, including over a looming shortfall in public transit funding and the governor’s push to streamline permitting for infrastructure projects, as California faces a budget deficit estimated to be more than $30 billion. They have just weeks remaining to work out a compromise before the start of the fiscal year on July 1.

“You cannot achieve that if you’re not close,” said Sen. Nancy Skinner, a Berkeley Democrat who leads the Senate budget committee. She characterized the remaining differences between the Legislature and the governor as a matter of details.

“The money will be very comparable,” she told CalMatters today.

Assemblymember Phil Ting, a San Francisco Democrat who leads the Assembly budget committee, pointed to permitting overhaul as the biggest unresolved issue. Newsom recently announced a plan to speed up development of major infrastructure projects by limiting environmental challenges, which he is trying to jam through the budget process over the objections of some legislators.

“We’re supportive of the overall direction of the governor’s bills, but we still need time to go through the policy details,” Ting said. “These are significant policy bills which all the different policy committees are reviewing.”

Overall, the Legislature’s $312 billion spending plan aligns with Newsom on avoiding major cuts to ongoing programs and even increasing core funding for some, including schools, public universities, welfare payments and health coverage. It also approves many of the new proposals from the governor’s own budget blueprint, such as $250 million in additional funding for flood protection and another $1 billion to help local governments address widespread homelessness.

How much assistance to provide public transit agencies, which warn that they may go over the “fiscal cliff” without an infusion of cash from the state because of steep ridership declines during the coronavirus pandemic, has been a key subject of disagreement.

Newsom wants to pull back more than $2 billion that was previously promised for local rail infrastructure. Legislative Democrats not only rejected that move, but also proposed an additional $1.1 billion over the next three years from the state’s cap-and-trade funds to help cover operating expenses for transit agencies.

Even that aid is not enough to avoid cutbacks in service, according to the California Transit Association, which represents the industry and pegs its revenue gap at closer to $6 billion.

“We are acknowledging that this isn’t a funding package that will address the full balance of our needs, but we see this as something that will address the most immediate needs,” said Michael Pimentel, executive director of the association. “It gives us the ability to come back in future months and future years and continue the conversation.”   

Legislative Democrats’ plan also seeks $1 billion more than the governor for local homelessness initiatives and $1 billion to increase reimbursement rates for providers of subsidized child care, who say they do not make enough money to cover their costs. Newsom is pushing to change those rates through a more comprehensive overhaul.

Newsom’s budget proposal eliminated $6 billion in climate change programs, triggering alarm from environmentalists and some legislators. While most of those cuts remain in the legislative plan, it would restore $167 million of the $561 million the governor proposes cutting from projects to protect the coast against rising seas from climate change. 

“The wrinkle this year, relative to other years, is there is a new degree of challenge when you’re trying to close a shortfall,” said H.D. Palmer, spokesperson for the governor’s Department of Finance.

Palmer declined to discuss what specific issues remain unresolved in the negotiations, though he acknowledged that the permitting proposal is a priority for Newsom.

“We hope we’ll be able to resolve those differences sooner than later,” Palmer said.

CalMatters’ state Capitol reporter Sameea Kamal and climate policy reporter Alejandro Lazo contributed to this story.