January 14, 2022 - From the January, 2022 issue

Governor Newsom's Proposed 2022-23 State Budget

On Monday, January 10 Governor Newsom announced his $286 billion budget request for 2022-23. TPR excerpts the Governor’s Proposed Budget Summary, highlighting requested state spending for economic and workforce development, transportation, energy, water, climate, housing, and homelessness. Find more resources on the Governor's budget request online, here.


FUTURE EXPANDING OPPORTUNITY AND STRENGTHENING CALIFORNIA'S FUTURE

California is uniquely positioned to confront climate change while simultaneously investing in expanding opportunity and strengthening California's future. The Budget focuses new investments in the continued growth of the state's economy and opportunity for all Californians, and positions the state as a global leader in innovation and solutions to both mitigate and adapt to the changing climate.

California is home to industries that have fundamentally altered the way the world lives and communicates. This leadership will be furthered by encouraging the development of climate solutions that prepare and protect communities, create jobs, and fuel economic growth.

ECONOMIC GROWTH AND JOB CREATION

The Budget restores business tax credits, including research and development credits and net operating losses that were limited during the COVID-19 Recession, and proposes an additional $250 million per year for three years for qualified companies headquartered in California that are investing in research to mitigate climate change.

The Budget also includes a new tax credit for those that opt in to develop green energy technologies—totaling $100 million per year for three years. So Californians can share more broadly in the gains from these innovations, these new credits will be structured so that when the business becomes profitable, a share of the profits will be repaid to the state. The state also plans to develop naturally occurring resources of lithium—a critical component of advanced battery technology—to improve the state’s ability to store renewable energy while creating high-paying jobs and generating benefits for surrounding communities and all Californians.

The Budget also proposes direct investments in climate-related research and development at the UC, including $185 million for applied research, regional networks of climate-focused technology incubators, and workforce development and training hubs. These investments will support the next generation of inventions and innovations to address climate change.

In addition to the federal Infrastructure Investment and Jobs Act (IIJA) of 2021, which will deliver billions of dollars for infrastructure to California, the Budget makes an historic state investment of over $20 billion in infrastructure-related investments to prepare and protect California communities from climate change. These investments will further facilitate economic growth and create thousands of jobs.

STRENGTHENING SMALL BUSINESS

California small businesses are drivers of economic growth—creating two-thirds of the state’s new jobs during the recovery. Last year's budget created the nation’s largest small business relief program—providing billions in needed relief to thousands of small businesses, and the Budget proposes approximately $500 million in additional tax relief over several years through state conformity for qualified California recipients of federal relief grants in significantly impacted industries. To further encourage small business creation, the Budget waives initial filing fees for new businesses. In addition, the Budget permanently expands programs that provide technical assistance and access to capital to spur business creation in underserved communities. The Budget also includes

$150 million one-time General Fund to support small businesses previously waitlisted in prior rounds of the state’s Small Business COVID-19 Relief Grant Program.

The Budget also allocates $3 billion General Fund over the next two years to reduce the Unemployment Insurance Trust Fund debt owed to the federal government. Over the long-term, this will reduce costs to the state and benefit employers by reducing debts accumulated during the pandemic.

EXPANDING WORKFORCE TRAINING AND OPPORTUNITY

So more Californians can participate in California's economic growth, the Budget includes a multipronged strategy to train workers for jobs critical to California's economic growth and to meet growing demands for teachers and health care workers.

These investments start in the K-12 school system with $1.5 billion Proposition 98 General Fund to support the development of college and career pathways focused on education, health care, technology, and climate-related fields. Promoting pathways that allow students to move seamlessly from high school to college to career will improve the number of students who pursue and achieve post-secondary education and training. These funds will focus on creating local partnerships that bring together school systems, higher education institutions, and employers to develop integrated pathways to college and careers in these high-demand fields.

In addition, the Budget invests $1.7 billion to expand the state's health and human services workforce, including training strategies to increase the state’s workforce of nurses, social workers, emergency medical technicians, behavioral health care providers, and community health care workers.

Building upon last year’s multi-billion dollar investment in teacher preparation, retention, and training, the Budget waives certain teacher examination fees and encourages the development of new integrated teacher preparation programs to address the state's shortage of qualified teachers.

CLIMATE CHANGE AND WORKFORCE

The Budget includes multiple workforce investments with a focus on climate change, including $35 million General Fund for the UC to create regional workforce development and training hubs focused on climate change; $30 million General Fund over two years to the CCC to train, develop, and certify forestry professionals; and

$60 million General Fund over three years for the California Workforce Development Board's Low Carbon Economy Workforce grant program to support workforce development programs that align with strategies in the state's Climate Change Scoping Plan.

Last year, $600 million was allocated to the Community Economic Resilience Fund for regional strategies that support economic and workforce transitions caused by the COVID-19 Pandemic, climate change, and other factors. The Budget complements this effort with $450 million General Fund over three years starting in 2023-24 to support local governments as local economies adjust, $215 million General Fund over two years to support an oil and gas well capping initiative to improve the safety of communities while providing high-quality jobs, and $50 million General Fund to establish a fund for displaced oil and gas workers as the state continues to phase out oil production.

ADDRESSING CLIMATE CHANGE

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Building on last year's historic $15 billion in climate investments, the Budget integrates climate, equity, and economic opportunity across the state’s budget—including housing, health, and education—to mobilize a coordinated state response to the climate crisis. 

WILDFIRES

California experienced 4 of the 20 largest wildfires in its history in 2021. Last year, the state expanded firefighting capacity and invested $1.5 billion to significantly increase the state’s ability to prevent wildfires. The Budget proposes an additional $1.2 billion over two years to continue investments in forest health and fire prevention, including a major new reforestation effort. The Budget also makes a major investment to expand firefighting efforts, including new dedicated aircraft and hand crews, as well as

$400 million to address the effects of the recent prolonged wildfire seasons on CAL FIRE firefighters.

DROUGHT

Despite recent rain, dry conditions may extend to a third consecutive year, requiring the state to prioritize State Water Project allocations for health and safety needs and to maintain salinity control in the Bay-Delta to protect endangered species. Building upon last year’s three-year, $5.2 billion allocation to support drought response and long-term water sustainability, the Budget includes an additional $750 million General Fund to address immediate drought response needs, including $250 million set aside as a contingency. These investments will expand support for critical drinking water emergencies and mitigate drought damage to fish and wildlife, and the investments will also support small farmers and ranchers and water systems facing a loss of water supply.

TRANSPORTATION

The IIJA will deliver more than $10 billion of new formula-based transportation funding to California over the next five years and billions of dollars in additional funding from new competitive grants. This measure could also provide billions in additional funds for clean drinking water, clean energy, toxic cleanup, broadband, and other infrastructure investments.

The Budget includes an additional $9.1 billion ($4.9 billion General Fund and $4.2 billion Proposition 1A bond funds) to support the continued development of a first-in-the-nation, electrified high-speed rail system in California, regional transit and rail projects, bicycle and pedestrian projects, and climate adaptation projects,  with  a particular focus on aligning the state's transportation system with its climate goals. The Budget also includes $1.2 billion General Fund for improvements to the state's goods movement infrastructure, including improving data interconnectivity to reduce congestion and increase supply chain efficiency, thereby reducing harmful emissions from this critical sector.

The Budget adds an additional $6.1 billion (General Fund, Proposition 98 General Fund, federal funds, and Greenhouse Gas Reduction Fund) over five years, which builds on last year's unprecedented zero-emission package, for a total of $10 billion to advance California's climate and transportation goals. These funds are focused on supporting zero-emission vehicles and charging infrastructure in low-income communities across the state, including funding for community-based projects.

The Budget also invests significantly in replacing heavy-duty trucks and buses with zero-emission vehicles, given their disproportionate impact on low-income communities and communities near California's ports, as well as green school transportation to reduce harmful emissions from aging diesel-fueled bus fleets and reduce ongoing school transportation costs.

ENERGY

The Budget makes investments to meet the state's clean energy goals with $2 billion General Fund over two years to provide incentives for long-duration-storage projects, renewable hydrogen, and industrial decarbonization, including in the food processing sector. The Budget also includes funding for decarbonization and electrification of existing buildings in disadvantaged communities, as well as infrastructure improvements to facilitate the development of offshore wind energy production.

HOUSING

Since 2019, California has invested significant funding for affordable housing development throughout the state, and has enacted laws to hold local jurisdictions accountable for meeting their regional housing needs. The Budget builds upon the $10.3 billion housing investment made last year with a focus on aligning housing goals and climate goals.

The Budget proposes an additional $1.5 billion over two years to accelerate the development of affordable housing. The focus of the majority of these investments is on development in and near downtowns throughout the state. Building housing near jobs, schools and other amenities reduces commutes and greenhouse gas emissions.

HOMELESSNESS

The state has invested billions of dollars in recent years to provide funding to local governments for critical housing supports and homelessness services, marked by last year’s three-year, $12 billion allocation. The state has also invested in new housing through Homekey—an effort started during the COVID-19 Pandemic that has acquired and converted a variety of building and housing types—including hotels, motels, and commercial buildings—to house individuals and families experiencing homelessness.

This effort was also expanded last year to include the development of a behavioral health continuum of housing and community care facilities.

The Budget proposes an additional $2 billion General Fund over two years to continue the state’s efforts to address homelessness by investing in behavioral health housing and encampment cleanup grants. These investments are intended to serve as a bridge to other related efforts such as Homekey and California Advancing and Innovating Medi-Cal (CalAIM), which will redesign Medi-Cal to better serve Californians, including individuals experiencing homelessness and provide long-term care.

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© 2022 The Planning Report | David Abel, Publisher, ABL, Inc.