California's Democratic Governor, Gavin Newsom, unveiled a $291 billion state budget for the fiscal year 2024-25 on Wednesday, which anticipates a deficit of $37.9 billion.
To address this shortfall, Newsom has proposed a combination of measures including drawing $13 billion from reserves, making $8.5 billion in program cuts, and deferring certain expenditures to future years.
The Governor's budget proposal will now enter a six-month negotiation period with the state Legislature, which is also under Democratic control. The new budget year commences on July 1.
Newsom, who will conclude his second and final term in January 2027, has prioritized addressing homelessness and boosting housing. However, his budget proposal includes over $1.2 billion in cuts to housing programs. These cuts encompass $300 million from regional planning grants, a $250 million reduction for the construction and preservation of multifamily housing, and another $250 million cut from a program aimed at acquiring and rehabilitating properties at risk of foreclosure.
The Governor also plans to postpone $260 million in grants to cities and counties for homelessness initiatives, shifting this expenditure to the 2025-26 budget. Additionally, he proposes a $100 million cut from the administration of the homelessness prevention grant program.
In terms of mental health, Newsom's proposal maintains spending on expanded services, including funding for wellness coaches for children and youth. While a $1.5 billion program to assist counties in finding housing for homeless individuals with serious mental illness and substance use disorders largely remains intact, $235 million in spending is deferred to 2025-26.
The Governor's budget proposal also includes a $2.9 billion cut in climate change spending. This includes a $40 million reduction from a program assisting local and regional governments in combating the effects of extreme heat, and a $23.5 million cut from a pilot program for zero-emission trucks transporting goods from ports. Newsom also plans to delay $600 million in spending for programs promoting the replacement of gas vehicles with hybrid and zero-emission ones until 2027-28.
In the healthcare sector, Newsom is seeking legislative approval to tie healthcare workers' pay increases to the availability of state funds. This comes after he signed legislation last year to gradually raise their minimum wage to $25 an hour, with the increases set to begin on June 1. The proposal also defers over $300 million of a $975 million program designed to boost the number of individuals entering behavioral health and social work professions.
In education, Newsom's proposal includes $126.8 billion for K-12 programs, a decrease from last year's $129.2 billion. This includes a reduction in school construction funding from the previously planned $875 million to $375 million. Furthermore, $550 million for grants to school districts to upgrade preschool, kindergarten, and pre-K facilities would be deferred to 2025-26. However, the proposal maintains $500 million in spending for zero-emission school buses.
For higher education and financial aid, Newsom proposes an allocation of $44.8 billion.
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