Every year at this time, California’s governor releases an adjusted budget proposal to the legislature based on revenues attained compared to monthly estimates. The governor’s office said today that revenues have fallen short of those estimates since the passage of the 2022 state budget, forcing a number of tough decisions at this time.

But Governor Newsom sounded mostly upbeat at a speech introducing highlights of the May revisions, sticking to talking points that suggest his administration is still proposing major investments in a number of categories. His office even suggested they were prepared for lower revenues, saying in a press release, “California has planned for this potential shortfall, with the Governor and Legislature paying down the state’s prior debts, building unprecedented reserves, and prioritizing one-time investments.”

“In partnership with the Legislature, we have made deep investments in California and its future – transformative efforts that will benefit generations of Californians, and that this budget will continue to guide as we navigate near-term ups and downs in revenue,” said Newsom. “As we prepare for more risk and uncertainties ahead, it’s critical that we keep the state on a solid fiscal footing to protect Californians and our progress in remaking the future of our state.”

And while Newsom’s budget revision does not predict a recession, the governor is proposing $37.2 Billion in total budgetary reserves, including $22.3 billion in the state’s Budget Stabilization Account.

The investments he proposes include the following:

Infrastructure

When including major investments from the last two state budgets, as well as significant funding from the Federal infrastructure bill passed last year, California will invest more than $180 Billion in the next few years on “clean energy, roads, bridges, public transit, water storage and conveyance and expanded broadband service,” says the governor’s office. The administration points out that the investments will create hundreds of thousands of jobs while providing residents a state that is, “better connected, safer, and more prepared for our future.”

Health Care Access

The May Revision includes billions to continue investments in CalAIM, an effort to transform Medi-Cal, an expansion of health care to low-income Californians regardless of their immigration status, and making insulin more affordable through the CalRX program.

Homelessness

To date, Governor Newsom has invested $15.3 Billion to address the homeless crisis, which his office says is up from $500 Million when he took office and the most in state history. The May Revision “maintains” billions in aid to local governments and encampment resolution grants, which provide services and supports that address the immediate physical and mental wellness to people currently experiencing homelessness and which are intended to result in pathways to safer and more stable housing.

Housing

The governor’s office claims that, “In the last four years, California invested more to increase housing supply than ever before in state history while holding local governments accountable.” It’s true that the State Housing and Community Development Department, through dramatic increases to most city’s Regional Housing Needs Assessments, or the required number of housing units they must have built or planned for between 2021-2029, is holding the fire to the feet of California cities. The Attorney General has even sued NIMBY cities like Huntington Beach for their willful refusal to grow their housing stock.

All told, the state will be requiring municipalities to build about 2.5 million new units in this housing cycle, one million of which must be affordable. Newsom says the state will continue to use a host of additional tools to increase housing supply, including:

• Improving state financing
• Targeting housing investments
• Providing technical assistance
• Eliminating regulations
• Leveraging other land use tools

Climate Goals

Newsom’s press release claims California is working through $48 Billion in commitments over the next many years to advance what they call the state’s “world-leading agenda” to achieve climate neutrality by 2045. His office also touts their record of keeping Californians protected from the effects of oil drilling and commitment to deliver 90 percent clean energy by 2035. Newsom is also proposing the development of a “Climate Resilience Bond,” the proceeds from which will go to sustaining the investments in California’s climate goals.

Public Safety

The governor says he will maintain over $800 Million in public safety investments, which will include:

• Victim support services
• Officer training and wellness programs
• Non-profit security grants
• Efforts to combat fentanyl

Education

The May Revision will continue the governor’s commitment to fund both years of transitional kindergarten for youngsters. It will also allocate $1.6 Billion to offer all California students – regardless of income – two free meals a day, or 12 million meals per day across the state.