IntroductionGovernor Gavin Newsom released the May Revision to his proposed 2022-23 state budget on May 13, projecting $49 billion in discretionary revenues, a $227 billion General Fund spending plan, and total reserves of $37 billion. Show
The state’s fiscal health presents state leaders with an opportunity to provide targeted relief to the Californians most harmed by rising costs of living and an ongoing pandemic. While the governor’s proposal makes some strides, it fails to adequately provide direct, meaningful assistance to individuals and families struggling the most to pay for basic needs. Specifically, the administration proposes to move forward with a proposal to provide rebates to households based on vehicle registration — knowing it will exclude many Californians who need help and include wealthy Californians who do not need the aid — that only reinforces California’s widening income and wealth gap. Progress in the May Revision The governor’s budget proposal would make progress by investing in:
Missed Opportunities in the May Revision In addition to the ill-advised vehicle-based rebates plan, the governor’s proposals fail to:
Tax Breaks for Wealthy Californians & Corporations Too many of the governor’s proposals also potentially waste vital resources by providing aid and tax breaks to wealthy Californians and corporations. Most notably, the administration proposes to spend $3 billion over the next two years to unnecessarily pay down a federal unemployment insurance loan, which amounts to a tax break that primarily benefits larger businesses and corporations. On the Gann Limit The May Revision also outlines how the governor proposes to manage the state’s constitutional spending limit — or Gann Limit. The administration projects that the state will be under the limit for the two-year period ending on June 30, 2022 and will exceed the limit, pending other budget choices, in 2022-23. However, if state revenues continue to grow, state leaders may be confronted with making cuts to current services to meet the state’s rising constitutional spending obligations. As a result, the Gann Limit threatens to hold the state back from building a better and more equitable future for Californians and will need to be repealed or significantly reformed in future years. Looking Ahead This First Look report by the Budget Center team outlines key pieces of the May Revision to the governor’s 2022-23 budget proposal and examines how state leaders can expand upon the governor’s proposals to invest in the people who are most struggling to meet basic needs. Californians across the state have put their own health and well-being at risk to keep our communities running amid the ongoing pandemic, and the 2022-23 state budget agreed upon by the Legislature and governor should ensure kids, families, and individuals can be healthy and thrive. what is the may revise?Released on or before May 14, the May Revision (also known as the May Revise) updates the governor’s economic and revenue outlook; adjusts the governor’s proposed expenditures to reflect revised estimates and assumptions; revises, supplements, or withdraws policy initiatives that were included in the governor’s proposed budget in January; and outlines adjustments to the minimum funding guarantee for K-14 education required by Proposition 98 (1988). ContentsBudget Overview
Health
Homelessness & Housing
Economic Security
Education
Justice Systems
Workforce & Other Proposals
Budget OverviewRevised Budget Projects Slightly Slower Economic Growth, Increase in Minimum WageThe governor’s revised economic outlook expects US and California economic growth to continue in the coming years, but at a slower rate than projected in January. This reflects several factors including global supply chain bottlenecks, recent interest rate hikes by the Federal Reserve, and persistently high inflation. The administration also expects steady job growth to continue, helping to draw more people back to the labor force and reducing the state’s unemployment rate to around 4% by the end of the year. In addition, the revised budget projects inflation to fall to around pre-pandemic rates by the end of 2023, which should contribute to real average wage gains in the coming years. The administration also projects that inflation will exceed 7% in 2021-22, which will trigger an automatic increase in the state’s minimum wage, bringing it up to $15.50 for all employers beginning January 1, 2023. Revised Budget Reflects Even Stronger Revenues than Anticipated in JanuaryThe governor’s January budget projected state revenues to come in significantly higher than assumed in the 2021 enacted budget. Despite a less positive economic outlook than expected in January, the revenue outlook for the three-year budget window spanning 2020-21 through 2022-23 has continued to improve. The governor now estimates that General Fund revenues across the budget window will be $55 billion higher than estimated in the January proposal, before accounting for transfers such as to the state’s rainy day fund. The administration projects that total General Fund revenues before transfers will be $223 billion in the upcoming budget year — an increase of $25 billion over the January estimate. For the state’s three largest revenue sources, the revised budget projects 2022-23 General Fund revenues of:
Additionally, the administration now estimates that General Fund revenues for the current 2021-22 fiscal year will also total $223 billion — $29 billion higher than projected in the governor’s January proposal. The estimated revenue growth over the three-year period reflects:
The governor’s revised plan proposes several tax changes, including:
The revised budget also reflects tax changes proposed in January that have already been enacted through early action, including an early reversal of the temporary limitation on business tax credits and net operating losses as well as the exclusion of federal COVID-relief grants to restaurants and venue operators for state tax purposes. Finally, the revised budget now assumes that the two new business incentive programs the governor proposed in January to encourage climate change mitigation research and technologies will be administered as a grant program instead of tax credits. Governor’s Car Rebate Proposal Steers Support in the Wrong DirectionThe governor’s revised budget includes a proposal announced by the governor in March to provide rebates to car-owning Californians to address high gas prices. Under the proposal, Californians would be able to receive $400 each for up to two registered vehicles, at an estimated cost of $11.5 billion. This proposal appears to be one of the major ways the proposed budget would stay under the State Appropriations Limit (see the Gann Limit section). The governor indicated that the rebate would not be available for vehicles above a certain value, but did not specify what this value would be. Previous information released by the administration suggested that the rebates would be provided to eligible individuals by a third-party vendor based on information provided by the Department of Motor Vehicles (DMV). This proposal falls short in several ways. Financial relief for Californians should be:
Unanticipated Growth in Revenues Allows State to Build Reserves to $37 BillionCalifornia has a number of state reserve accounts, some of which are established in the state’s Constitution to require deposits and restrict withdrawals, and some of which are at the discretion of state policymakers. California voters approved Proposition 2 in November 2014, amending the California Constitution to revise the rules for the state’s Budget Stabilization Account (BSA), commonly referred to as the rainy day fund. Prop. 2 requires an annual set-aside equal to 1.5% of estimated General Fund revenues. An additional set-aside is required when capital gains revenues in a given year exceed 8% of General Fund tax revenues. For 15 years — from 2015-16 to 2029-30 — half of these funds must be deposited into the rainy day fund and the other half is to be used to reduce certain state liabilities (also known as “budgetary debt”). Prop. 2 sets the maximum size of the BSA at 10% of General Fund Revenues and, if the limit is reached, any dollars that otherwise would have gone into the BSA would have to be spent on infrastructure, including spending related to deferred maintenance. Prop. 2 also established a new state budget reserve for K-12 schools and community colleges called the Public School System Stabilization Account (PSSSA). The PSSSA requires that when certain conditions are met, the state must deposit a portion of General Fund revenues into this reserve as part of California’s Prop. 98 funding guarantee (see Prop 98. section). The BSA is not California’s only reserve fund. Each year, the state deposits additional funds into a “Special Fund for Economic Uncertainties” (SFEU). Additionally, the 2018-19 budget agreement created the Safety Net Reserve Fund, which holds funds that can be used to maintain benefits and services for CalWORKs and Medi-Cal participants in the event of an economic downturn. Stronger-than-expected revenue collections result in changes to the BSA, PSSSA, and SFEU projections for 2022-23. The administration projects 2022-23 balances of:
The administration’s proposal for 2022-23 leaves the Safety Net Reserve at its 2021-22 level of $900 million. The governor’s proposal estimates that the BSA is now at its constitutional maximum (10% of General Fund revenue), resulting in a required $476 million in infrastructure investments in 2022-23. Taking into account the BSA, PSSSA, Safety Net Reserve, and SFEU, the governor’s proposal would build state reserves to a total of $37.1 billion in 2022-23. State Is Under the Gann Limit Through 2021-22, but Exceeds the Cap in 2022-23In 1979, California voters approved Proposition 4, a constitutional amendment to limit state and local spending that became known as the “Gann Limit” after its primary sponsor, Paul Gann. The Gann Limit restricts policymakers’ ability to use revenues that exceed the spending cap. At the state level, this cap is tied to California’s 1978-79 spending level and is adjusted each year for changes in population and per capita personal income, as explained in the Budget Center’s Gann Limit Q&A. The Gann Limit was not a factor in state budgeting for several decades but recently has emerged as a constraint because state revenues are “growing faster than the limit,” according to the Legislative Analyst’s Office (LAO). If the state exceeds the Gann Limit over a two-year period, the Legislature must spend the revenue over the limit in specific ways — providing half to taxpayers and the other half to K-12 schools and community colleges. State policymakers have limited options to structure budgets to avoid exceeding the spending cap. For example, they can spend more on things that are excluded from the limit, such as tax refunds, emergency response, and infrastructure projects, which can include housing. Reducing tax revenues, such as by expanding tax credits like the CalEITC, also helps the state to avoid exceeding the Gann Limit. The budget and policy choices reflected in the May Revision keep the state under the Gann Limit by $2.6 billion (on net) across 2020-21 and 2021-22, the current fiscal year. These choices include massive outlays in 2021-22 for infrastructure, emergency response, and the governor’s ill-advised cash rebates for vehicle owners — all of which are excluded from the Gann Limit. (See the “Rebates” section for more on the governor’s vehicle-based rebate proposal.) Specifically, the revised budget excludes:
In contrast, the administration projects the state will exceed the Gann Limit by $3.4 billion in 2022-23, the fiscal year that begins on July 1. This occurs largely because the May Revision excludes much less spending from the Gann Limit in 2022-23 compared to 2021-22. For example, the revised budget excludes:
Notably, only a small share of Gann-exempt infrastructure spending that the May Revision budgets for 2022-23 would go toward housing — a clear missed opportunity in light of the state’s housing affordability crisis. (See the Housing & Homelessness section.) As the governor and legislative leaders work toward finalizing the 2022-23 budget package, they will be able to craft a spending plan that satisfies Gann Limit requirements while also continuing to support baseline public services and systems. This is because the state’s large budget “surplus” provides policymakers with room to maneuver this year. Policymakers can meet the state’s constitutional obligations — including the Gann Limit and the Proposition 98 school funding guarantee — while also maintaining and in some cases expanding state services overall. However, the state is likely to face large and growing Gann Limit requirements in the next few years if revenues keep growing substantially. For example, the LAO estimates that under the governor’s revenue assumptions and spending proposals, the state would face Gann Limit obligations exceeding $20 billion in 2023-24. In addition, the state will continue to be required to spend part of each General Fund dollar to satisfy its other constitutional obligations, including Prop. 98 (funding for K-14 education) and Prop. 2 (reserve deposits and debt payments). Under this scenario, for every dollar in revenue that is subject to Gann Limit requirements, the state would have to spend more than a dollar to meet its constitutionally required obligations. To keep the budget in balance while also satisfying all of these obligations, state leaders would have to cut spending on services and systems that lack constitutional protections, including child care, health care, the CSU and UC, college financial aid, and much more. In short, while state leaders will be able to manage within the Gann Limit’s constraints this year, over the longer term the spending cap is a roadblock to creating a more equitable California. Since the Gann Limit is in the state Constitution, state leaders would need to ask voters to approve any changes to it. Repealing or meaningfully reforming the Gann Limit would allow the state to make the investments needed for all Californians to be healthy and thrive. HealthMay Revision Bolsters COVID-19 Response EffortsCOVID-19 continues to be an ongoing health threat for communities across the state. Recognizing the possibility of new variants of the virus as well as future surges in cases, the May Revision reflects an increase of $1.2 billion General Fund in 2021-22 and $760.8 million General Fund in 2022-23 to bolster COVID-19 response. Of this amount, $1.1 billion would fund the SMARTER Plan for the next phase of California’s pandemic response. In order to implement the SMARTER Plan, the May Revision includes:
Public Health Support Maintained, More Needed to Promote Health EquityThe California Department of Public Health as well as local public health departments play a critical role in protecting and promoting Californians’ health and well-being. Yet despite this important responsibility, funding has not kept pace with the cost of responding to ongoing and emerging health threats. Many Californians suffered as a result of the COVID-19 pandemic due to the state’s lack of preparedness. Most notably, communities of color experienced higher rates of illness and death due to historic and ongoing structural racism that deny many communities the opportunity to be healthy and thrive. The intersection of the pandemic and structural racism continues to highlight the need to address the root cause of health disparities. The governor’s revised budget maintains many public health investments that were proposed in January, including $300 million ongoing General Fund to improve public health infrastructure at the state and local level. Under this proposal, local health jurisdictions would receive a minimum base allocation to support workforce expansion, data collection and integration, and partnerships with health care delivery systems and community-based organizations. At the state level, this funding would establish a new Office of Policy and Planning to assess current and emerging public health threats as well as support other core functions, including emergency preparedness and public health communications. This funding provides much-needed support for public health infrastructure, but state leaders can make additional investments to bolster the public health workforce at the local level. Doing so can help to ensure that counties and cities have the capacity to address ongoing and future public health threats. State leaders can also do more to advance health equity. Given that structural racism continues to have a profound impact on the health and well-being of many communities across the state, the governor’s administration and other state leaders can employ a variety of strategies to combat the effects of historical and ongoing racist policies and practices. Such strategies include declaring racism a public health crisis at the state level and establishing dedicated funding to support community-based organizations, clinics, and tribal organizations in their efforts to advance health equity. Revised Budget Maintains Expansion of Medi-Cal to All Undocumented ImmigrantsBuilding on the federal Affordable Care Act (ACA), California has substantially expanded access to health coverage in recent years. For example, more than 14 million Californians with modest incomes — nearly half of whom are Latinx — receive free or low-cost health care through Medi-Cal (California’s Medicaid program), several million more than before the ACA took effect. Another 1.5 million Californians receive subsidies to reduce the cost of coverage purchased through Covered California, our state’s health insurance marketplace. Nonetheless, many Californians — including many immigrants who are undocumented — remain uninsured while those with health coverage often face high monthly premiums and excessive out-of-pocket costs, such as copays and deductibles, when they seek health care services. The May Revision:
Revised Budget Increases Funding to Support Children’s Mental HealthThe May Revision builds on the significant investments that state leaders have made to support Californians’ behavioral health needs (mental health conditions and/or substance use disorders), which have increased as a result of the ongoing pandemic. The administration acknowledges the toll on children and youth in particular and proposes additional funding to urgently address their behavioral health needs. The revised budget includes the following changes for the Children and Youth Behavioral Health Initiative, which aims to transform California’s behavioral health system for all children and youth:
The May Revision also includes proposals for suicide prevention efforts, highlighting the need to address youth suicide rates, particularly among transgender youth and Black youth. Specifically, the May Revision includes:
The revised budget also includes $64.7 million General Fund in 2022-23 to administer the governor’s proposed Community Assistance, Recovery and Empowerment (CARE) Court plan that was unveiled in early March. See the Homelessness and Housing section for more information. Building on the opioid response investments included in the governor’s January proposal, the May Revision includes an additional one-time $41.8 million Opioid Settlements Fund in 2022-23 and allocates the funding as follows:
 The Governor’s May Revision ExplainedSave the date + register now! Join us on May 20 as our Budget Center experts explore what the governor’s budget proposals mean for Californians with low incomes who we know are most struggling to make ends meet. Homelessness & HousingGovernor’s New Homelessness Proposals Prioritize Interim Housing and HomekeyHaving a place to call home is the most basic foundation for health and well-being no matter one’s age, gender, race, or zip code. But more than 161,000 Californians were experiencing homelessness and its destructive effects in early 2020, with Black, American Indian or Alaska Native, Pacific Islander, and LGBTQ+ Californians particularly affected by inequitable burdens of homelessness, and many older adults experiencing homelessness. The May Revision maintains the governor’s January homelessness proposals, which emphasize clearing encampments and funding interim housing and treatment services for unhoused individuals with serious behavioral health issues. New proposals to address homelessness in the May Revision include:
Some interim housing is needed within the homeless services system to meet urgent housing needs, but the most effective approaches to addressing homelessness — including for individuals with serious behavioral health needs — combine long-term housing with supportive services as needed. This housing can include leased units or tenant-based rental assistance as well as deed-restricted units. Besides the modest one-year increase in Homekey funding, the governor’s revised budget proposes no new investments to produce or acquire permanent affordable housing (see the Housing section) or to fund rental subsidies to enable individuals to exit homelessness. Another significant proposal described in the revised budget is the Community Assistance, Recovery and Empowerment (CARE) Court, a plan to establish court-ordered treatment for people experiencing both homelessness and serious behavioral health challenges (see the CARE Court section). The May Revision also maintains the $1 billion in flexible local funding in 2022-23 through the Homeless Housing, Assistance and Prevention (HHAP) Program that was provided through the 2021-22 budget as $1 billion annually for two years, with the intent to continue in future years “based upon performance and need.” In the May Revision, the governor proposes extending this annual funding beyond 2022-23 but requiring that local entities focus the spending on “highest priority needs, such as encampment resolution, Homekey operating sustainability, and CARE Court housing supports.” Continuing this funding commitment is important to sustain new projects and support existing effective local efforts, but requiring that the funding be spent on specific items would reduce flexibility to focus on identified local needs and gaps in services, which could reduce its effectiveness. Governor Meets Emergency Rental Assistance Commitment, but Fails to Boost Investment in Affordable HousingAll Californians deserve a safe and stable place to call home, yet California’s serious housing affordability challenges continue to threaten the well-being of families and communities and the future growth of the state — with renters, those with low incomes, and Latinx, Black, and immigrant Californians most severely affected. The Governor’s May Revision maintains the $1.5 billion one-time General Fund (to be spent across 2022-23 and 2023-24) proposed in January to boost funding in some programs that support affordable housing development and preservation. The annual $500 million boost for the state Low-Income Housing Tax Credit (LIHTC) and multi-year funding allocation for student housing are also maintained. For future years, the May Revision proposes an additional $500 million General Fund, over 2023-24 and 2024-25, to increase “downtown-oriented and affordable housing” developed through “adaptive reuse” of underutilized commercial and retail space. Beyond the $150 million for Homekey, described in the Homelessness section, the Governor proposes no new investments for development, acquisition, or preservation of affordable housing for 2022-23 in the May Revision – despite record-breaking revenues above January projections and constitutional budget rules (including the Gann limit and Proposition 2, see Gann Limit and Reserves sections) that encourage or require substantial spending on infrastructure this year. This represents a key missed opportunity to invest in long-term solutions to the state’s housing affordability crisis at a time when about half of renters with low incomes are facing housing hardship and “shovel ready” affordable housing projects face a funding backlog. In terms of direct assistance to Californians experiencing hardship, the May Revision includes support for both rent and utility assistance by:
Both utility assistance programs are administered by the Department of Community Services and Development. Proposed CARE Court Framework Lacks Housing First PracticesAddressing the growing number of unhoused Californians has become one of the most serious issues facing the state and a top priority for policymakers. The current homelessness challenge is primarily due to the severe shortage of affordable housing — especially for people with the lowest incomes. However, for the minority of unhoused Californians with behavioral health conditions or substance use issues, inadequate investments in behavioral health services has also been a compounding factor, among others. In an attempt to target the small number of unhoused individuals that lack decision-making capacity due to an untreated serious behavioral health condition, the May Revision includes the governor’s proposed Community, Assistance, Recovery, and Empowerment (CARE) Court plan that was unveiled in early March. The proposal creates a new framework to provide at-risk or unhoused Californians with untreated schizophrenia spectrum or other psychotic disorders, who may also have substance use disorders, with a court-ordered treatment plan. Individuals can be referred to CARE Court by behavioral health providers, community-based social services, family, first responders, or other specified parties. As proposed, all counties would participate in the program, but it does not require courts to order housing or to require the county to provide housing. This structure does not prioritize effective “housing first” interventions that provide the housing and supportive services needed for individuals to maintain stable housing and live a healthy life. If individuals are deemed to have not successfully completed their mandated Care Plan, they may be referred to conservatorship. To administer CARE Court, the May Revision proposes $64.7 million General Fund in 2022-23. This includes $39.5 million General Fund in 2022-23 and $37.7 million ongoing General Fund for the Judicial Branch, $10 million ongoing General Fund for the Department of Aging for the CARE Court Supporter Program, and $15.2 million General Fund in 2022-23, with smaller ongoing funds to the Department of Health Care Services for
training and technical assistance, data collection, and evaluation. The administration estimates that CARE Court would serve 7,000-12,000 individuals. Economic SecurityMay Revision Maintains Refundable Tax Credit ProposalsThe governor’s revised budget maintains his January proposals to:
As in January, the revised budget does not include any proposals to strengthen or expand the CalEITC. May Revision Maintains Medi-Cal Expansion, but Fails to Expand Food Assistance to All Undocumented ImmigrantsCalifornia has the largest share of immigrant residents of any state and is home to an estimated 2 million to 3.1 million individuals who are undocumented. Half of all California workers are immigrants or children of immigrants. These Californians are deeply integrated into our communities, schools, and workplaces. Prioritizing the urgent needs of undocumented immigrants and their families is an important opportunity for California’s policymakers to make our support systems more equitably inclusive, to make our state’s economy more resilient, and to lead in this time where the state has the resources. Specifically, the May Revision:
The May Revision misses an opportunity to extend targeted economic support to undocumented families who have been excluded from thousands of dollars in federal aid and other support programs to help families meet their basic needs during the pandemic, including unemployment benefits. The administration’s proposal to expand food assistance to adults age 55 and older is an important step. But more than half of children in undocumented immigrant families live in poverty. Completing this expansion to include Californians of all ages, regardless of immigration status, is necessary to truly dismantle racist and xenophobic barriers and to address persistent gaps in federal aid. Revised Proposal Yields Mixed Progress for CalWORKs FamiliesThe California Work Opportunity and Responsibility to Kids (CalWORKs) is a critical support that provides modest cash assistance for families with low incomes, particularly families of color.Monthly CalWORKs grants are adjusted according to the number of people in the household who are eligible for CalWORKs. A family member may be excluded from grant calculations for reasons including having exceeded the time limit for assistance, not meeting work requirements, or due to their immigration status. These situations are not rare but rather represent almost two-thirds of CalWORKs cases. In recent years state policymakers have raised the maximum CalWORKs grant above the deep poverty threshold (50% of the federal poverty line) for some CalWORKs families but not for those with an excluded family member, unfairly leaving them out of receiving sufficient assistance for basic needs. In the revised budget, the administration again misses the opportunity to raise CalWORKs grants above deep poverty for all families. The May Revision includes an 11% increase to CalWORKs grants (at an estimated $296.2 million in 2022-23). This increase is due to AB 85 of 2013, which provides a grant increase based on projected sales tax revenues. For example, under the governor’s proposal, while a family of three with no excluded members would receive a grant that is above deep poverty at 53% of the federal poverty line, a family with an excluded member would receive a grant that is below deep poverty at just 42% of the federal poverty line. To ensure grants are above deep poverty for all families, state legislators should also provide an additional 18% grant increase targeted to families with an excluded member. The May Revision maintains the January proposal to allow former CalWORKs families to receive outstanding child support debt that currently goes to the state, county, and federal governments as “reimbursement” for the costs associated with the CalWORKs program. Under this change, these families would receive an estimated annual total pass through of $187 million. State leaders should build on this change to end racist policies that block Black, Latinx, and other families from economic security by also passing through 100% of child support payments to current CalWORKs and Medi-Cal recipients and ending the state’s collection of interest on child support debt. May Revision Maintains Governor’s CalKIDS ProposalThe California Kids Investment and Development Savings (CalKIDS) program was created in 2019-20 to establish college savings accounts for all newborns and deposit at least $25 into those accounts. In 2021-22, the program was expanded to establish accounts for all public school students in grades 1-12 who live in families with low incomes and to deposit $500 into those accounts, with an additional $500 for foster youth and $500 for homeless students, up to a maximum of $1,500 per child. CalKIDS is expected to launch this summer. The May Revision proposes to allocate $299,000 one-time General Fund and $1.5 million ongoing General Fund beginning in 2023-24 to support last year’s expansion of the CalKIDS program and to support outreach costs. This is a reduction in funding from the governor’s January budget which proposed allocating $170 million ongoing General Fund to support the expansion of CalKIDS as well as $5 million one-time and $5.2 million ongoing General Fund to support outreach and implementation costs. Governor Fails to Increase Payment Rates for Subsidized Child Care ProvidersCalifornia’s subsidized child care and development system has long been critical to the state’s economic infrastructure, helping families struggling to make ends meet cover the high cost of early care and education for their children. The governor’s May Revision would maintain federal child care relief funding that was included in the January proposal to expand child care programs to serve an additional 36,000 children ($22.5 million for General Child Care and $247.3 million for the Alternative Payment Program). Yet, the May Revision would not increase provider payment rates for the 2022-23 state fiscal year, despite stagnant payment rates, the rising statewide minimum wage, and the increasing price of food and supplies. Other child care investments in the May Revision include:
Finally, the administration has not made any proposals to further boost the economic security of child care providers, such as by offering health care or retirement benefits. Nor have state leaders provided resources for workforce development training — funding that was rescinded in the 2021-22 budget agreement due to pandemic-related budget uncertainties. May Revision Fails to Increase Payment Rates for California Workers Who Need Paid Time OffCalifornia’s paid family leave and state disability insurance programs allow workers to take paid time off from work to attend to their own health or that of a family member. The Disability Insurance Fund — funded entirely by California workers’ contributions — provides benefits to workers when care needs arise. Policymakers temporarily increased payment rates for these programs in 2018 from 55% of earnings to 70% for workers with very low pay and 60% of earnings for all
other workers, including full-time workers paid the minimum wage. Yet workers paid very low wages are far less likely to utilize the benefits they’ve paid for. May Revision Does Not Accelerate a Pending Increase to State SSP GrantsSupplemental Security Income/State Supplementary Payment (SSI/SSP) grants help well over 1 million low-income seniors and people with disabilities to pay for housing and other necessities. Grants are provided to individuals and couples and are funded with both federal (SSI) and state (SSP) dollars. State policymakers made deep cuts to the SSP portion of these grants in 2009 and 2011 to help close budget shortfalls caused by the Great Recession. Except for a small increase provided in 2017, the recession-era cuts to SSP grants remained in effect for more than a decade. State leaders changed course last year and adopted a substantial (24%) increase to SSP grants that took effect on January 1, 2022. The maximum monthly SSP grant for individuals jumped from $160.72 to $199.21. For couples, the maximum monthly SSP grant rose from $407.14 to $504.64. Also as part of the 2021-22 budget package, state leaders committed to providing an additional substantial increase to SSP grants in January 2024, subject to funding being provided in the 2023-24 state budget. In the meantime, advocates for older adults and people with disabilities have called on state leaders to accelerate this increase to provide a permanent and more timely boost to the modest budgets of SSI/SSP recipients as the cost of housing, food, and other necessities continues to rise. The May Revision:
Lacks significant new investments to address the needs of older adults and people with disabilities and advance the bold goals included in the Master Plan for Aging. support the Budget CenterWant to support our work? Please consider donating to the Budget Center to help advance understanding and transparency in the state budget process and create a more inclusive California. EducationAdministration Continues Push for Pre-Kindergarten ProgramsThe state currently funds two pre-kindergarten programs: transitional kindergarten (TK) and
the California State Preschool Program. TK is a two-year kindergarten program offered at local educational agencies (LEAs) to children turning five between September 2 and December 2 of each year. The 2021-22 budget agreement included a multi-year plan to expand the state’s existing TK program to all four-year-olds in the state. The May Revision builds off of the
transitional kindergarten proposals included in the January proposal, by eliminating credential requirements for TK teachers through June 30, 2026. Increased Revenues Significantly Boost the Minimum Funding Level for K-14 EducationApproved by voters in 1988, Proposition 98 constitutionally guarantees a minimum level of funding for K-12 schools, community colleges, and the state preschool program. Changes in state General Fund revenues tend to affect the Prop. 98 guarantee, and the May Revision’s estimates of 2021-22 and 2022-23 revenues are significantly higher than those estimated in January’s budget proposal. As a result, the May Revision assumes a 2022-23 Prop. 98 funding level of $110.3 billion, $8.4 billion above the level assumed in the Governor’s proposed budget, and a 2021-22 Prop. 98 funding level of $110.2 billion, $11.1 billion above the level assumed in January. The revised budget assumes a 2020-21 Prop. 98 funding level of $96.1 billion, slightly above the $95.9 billion funding level assumed by the Governor in January. Revenue projections in the Governor’s January budget proposal would have required total deposits of $9.7 billion into the Public School System Stabilization Account (PSSSA) — the state budget reserve for K-12 schools and community colleges. However, the May Revision projects a decrease in capital gains revenues as a share of total taxes that would reduce required PSSSA deposits and bring the total account balance to $9.5 billion in 2022-23. (See Reserves section.) Because the PSSSA balance is projected to exceed 3% of the total K-12 share of the Prop. 98 minimum funding level in 2021-22, current law would prevent K-12 school districts from maintaining more than 10% of their budgets in local reserves beginning in 2022-23. May Revision Dramatically Increases Funding for Several K-12 Education ProgramsThe largest share of Prop. 98 spending goes to California’s school districts, charter schools, and county offices of education (COEs), which provide instruction to 5.9 million students in grades kindergarten through 12. The governor’s revised spending plan significantly increases funding for the state’s equity-based K-12 education funding formula, the Local Control Funding Formula (LCFF), but proposes a less equitable per-pupil formula to allocate a large discretionary block grant. Specifically, the May Revision:
A portion of Proposition 98 funding provides support for California’s Community Colleges (CCCs), the largest postsecondary education system in the country, which serves high percentages of students of color and students with low incomes. CCCs prepare approximately 1.8 million students to transfer to four-year institutions or to obtain training and employment skills. The 2022-23 revised budget proposes to increase funding for deferred maintenance projects at the CCCs, increase base funding for the Student Centered Funding Formula (SCFF), and provide a large one-time discretionary block grant using a less equitable allocation method than the SCFF. Specifically, the revised spending plan:
Proposed Budget Provides Multi-Year Investments in the CSU and the UCCalifornia supports two public four-year higher education institutions: the California State University (CSU) and the University of California (UC). The CSU provides undergraduate and graduate education to roughly462,000students on 23 campuses, and the UC provides undergraduate, graduate, and professional education to about290,000students on 10 campuses. For both institutions, the administration maintains the governor’s January proposal of a multi-year budget through 2026-27, focused on increasing enrollment, raising graduation rates and closing graduation gaps, increasing affordability of on-campus housing, and decreasing non-tuition costs. For the CSU, the revised budget provides the following adjustments in addition to the $304.1 million ongoing General Fund proposed in January:
For the UC, the revised budget provides the following adjustments in addition to the $307.3 million ongoing General Fundproposed in January:
May Revision Misses Opportunity to Provide Additional Financial Support for Students Pursuing Higher EducationCal Grants are the foundation of California’s financial aid program for students with low and middle incomes pursuing higher education in the state. Cal Grants provide aid for tuition and living expenses that do not have to be paid back. The May Revision estimates that over 400,000 financial aid grants will be awarded to students in the 2022-23 academic year. Ensuring Californians have access and resources to attend and thrive in the state’s higher education institutions broadens opportunities for individuals and families and strengthens our state’s workforce to drive long-term economic growth. The governor’s revised spending plan proposes no new changes to student financial aid from those included in the governor’s January proposal. The governor misses an opportunity to better support California students. High costs of higher education, exacerbated by the economic hardship of COVID-19 pandemic, have caused many students to cancel their education plans. Since the beginning of the 2021-22 academic year, students in low-income, Black and Latinx households were most likely to cancel all plans to take classes from postsecondary institutions. The governor can continue to support students with low and middle incomes and reduce racial inequities in higher education by pursuing reforms to Cal Grants that streamline and eliminate remaining barriers that prevent more students from accessing state financial aid. In addition, more investments are needed to adequately address non-tuition costs, such as housing, food, transportation, and other basic living expenses. Justice SystemsGovernor Does Not Propose to Close More State PrisonsMore than 97,000 adults who have been convicted of a felony offense are serving their sentences at the state level, down from a peak of 173,600 in 2007. American Indian, Black, and Latinx Californians are disproportionately represented in state prisons — a racial disparity that reflects implicit bias in the justice system, structural disadvantages faced by these communities, and other factors. Among all incarcerated adults, most — 92,514 — are housed in state prisons designed to hold fewer than 82,000 people. This level of overcrowding is equal to 112.9% of the prison system’s “design capacity,” which is below the prison population cap — 137.5% of design capacity — established by a 2009 federal court order. California also houses more than 4,500 people in facilities that are not subject to the cap, including fire camps, in-state “contract beds,” and community-based facilities that provide rehabilitative services. The sizable drop in incarceration has resulted both from 1) a series of justice system reforms enacted by voters and state leaders and 2) changes adopted in 2020 to further reduce prison overcrowding in response to the COVID-19 pandemic, such as suspending intakes from county jails and implementing early releases. The revised budget:
Proposal Maintains Inequitable Crime Reduction Plan, Modestly Invests in Additional Public Safety-Related ProgramsCalifornia has adopted various justice system-related policy changes that reformed sentencing laws while still ensuring public safety. These reforms, passed through legislative action and voter approval, have led to sustained decreases in overall crime and prison population rates. Despite the relatively low and stable crime rates California has experienced since the mid-2000s, the May Revision maintains proposals that target retail theft and other crimes, and does not explicitly account for the potential racial discrimination that may arise in enforcement of those policies. The May Revision also proposes a series of new investments to support law enforcement, probation services, and victim supports, including:
Workforce & Other ProposalsThe Revised Budget Makes Additional Climate-Related Workforce InvestmentsTo create pathways to jobs in industries related to the care economy and climate adaptation, the revised spending plan maintains workforce development proposals included in the January budget and adds additional investments. The May Revision maintains investments in the care economy workforce and health-related fields. Those investments include major proposals such as $350 million for community health workers and $340 million for high road training partnerships in “family-sustaining” health care jobs. The revised spending plan also maintains all the investments aimed at supporting the state’s efforts to combat the climate crisis and the ongoing transition to clean energies. Those include $265 million to support the transition from oil and gas to other industries and $235 million for training programs and grants across various climate-related industries. The revised budget includes additional investments in workforce development opportunities related to climate adaptation, which include:
Other proposals in the revised spending plan include additional investments in apprenticeships. This includes:
The Revised Spending Plan Proposes $1.1 Billion to Bridge the Digital DivideThe pandemic has exposed the inequities in access to computers and high-speed internet, also known as the digital divide. Access to such technology is necessary to participate in education and other essential activities such as remote work, applying for jobs, virtual health appointments, and access to many other services. The digital divide disproportionately impacts low-income and Latinx households, as well as children and youth, seniors, and people with disabilities. The governor’s revised spending plan proposes $1.1 billion one-time over two years for broadband infrastructure. The proposal would provide $600 million in 2023-24 and $500 million in 2024-25 to the California Department of Technology (CDT) to support broadband infrastructure projects currently underway across the state. These dollars are in addition to investment of $3.25 billion for the same purpose provided in the 2021-22 budget. While broadband infrastructure is necessary to reach many households that are unconnected, especially in rural areas of the state, the proposal does not include support to address other aspects of the digital divide such as affordability barriers that keep many California households from connecting to the internet. Governor Proposes Additional Relief for Small BusinessesIn addition to the business tax proposals noted in the Revenue Outlook & Tax Proposals section — which are not specific to small businesses — the revised budget proposal includes some additional assistance targeted to small businesses, including:
Both of these grant programs would be administered by the Office of the Small Business Advocate (CalOSBA). Governor Maintains Unnecessary Unemployment Insurance Loan PaymentMillions of California workers who lost their jobs during the depths of the COVID-19 pandemic used unemployment insurance benefits to pay for basic needs like food and rent. Although these benefits are supposed to be financed through employer payroll taxes, California businesses — for decades — haven’t been paying the true costs of the benefits workers need during recessions. Consequently, California’s unemployment fund has been chronically underfunded, and the state had to borrow billions of dollars from the federal government to help pay for unemployment benefits during the pandemic. The governor’s revised budget continues to propose wasting $1 billion General Fund in 2022-23 and $2 billion in 2023-24 to pay down a portion of the state’s outstanding federal loans for these benefits. This proposal is unnecessary and amounts to a tax giveaway mostly benefiting large, profitable corporations, while wasting $3 billion that could be better spent supporting small businesses and California workers struggling to afford the high cost of living. Specifically, this proposal:
Businesses That Will Benefit Most Under Governor’s Unnecessary Unemployment Insurance Loan Payment
Administration Increases Spending to Respond to Climate ChangeThe revised budget provides additional funding for various proposals intended to help California and its residents adapt and respond to climate change. This includes:
The revised budget also outlines a plan for how to spend $768 million included in the 2021-22 budget to implement California’s Natural and Working Lands Climate Smart Strategy to advance “climate-focused land management” and the Pathways to 30×30 Strategy to accelerate conservation of California’s lands and coastal waters. In addition, the administration proposes to accelerate its $10 billion zero-emission vehicle (ZEV) plan to increase clean transportation options. Finally, the revised budget proposes converting two tax credits included in the January budget into a single Climate Innovation Grant program administered by the California Energy Commission and provides a Sales and Use Tax exclusion to incentivize projects that manufacture, process, or recover lithium, as outlined in the Revenue Outlook & Tax Proposals section. Each year, the Budget Center comes out with a First Look analysis of the governor’s May Revision, and we are proud to provide you with this timely breakdown. Want to support our work? Please consider donating to the Budget Center to help advance understanding and transparency in the state budget process and create a more inclusive California.What is California's fiscal budget?According to NASBO, California's recent expenditure totals (general fund spending/total spending, including federal transfers) were: FY 2022: $163.5 billion.
What is the state of California fiscal year?FISCAL YEAR (FY) - a 12-month budgeting and accounting period. In California, the fiscal year runs from July 1 through the following June 30.
How much money does the state of California have?The economy of the State of California is the largest in the United States, with a $3.37 trillion gross state product (GSP) as of 2021. It is the largest sub-national economy in the world.
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Economy of California.. What is the largest expense in the California state budget?Education accounted for 28.3 percent of state expenditures in fiscal year 2015, while 33.5 percent went to Medicaid.
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What was the projected state of the Californias budget for the fiscal year 2011?
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