The 2020-21 California state budget put forward by state leaders recognizes the challenges the state faces and meets state leaders’ Constitutional obligation to enact a balanced budget, the spending plan fails to meet many of the most urgent and basic needs of Californians: ensuring they can safely earn a living in healthy environments and provide food, housing, and health care for their families. Without bolder action, including raising additional revenues and pursuing appropriate borrowing, the enacted 2020-21 budget will exacerbate income and wealth inequality and systemic inequities that permanently leave Californians of color, undocumented residents, and households with low incomes locked out of our state’s prosperity.
On May 14, 2020, Governor Gavin Newsom released the May Revision to his proposed 2020-21 state budget. Our state is facing unprecedented challenges as a result of the COVID-19 crisis – an estimated $54 billion state budget shortfall for the current (2019-20) and next (2020-21) fiscal years, a rapid increase in unemployment, and millions of Californians in need of assistance as they confront new challenges to paying rent, buying groceries, and covering the costs of basic needs. The health and economic hardships are especially striking for Black and Latinx Californians, women and children in low-income households, and undocumented Californians. This First Look report summarizes key provisions of the Governor’s May Revision.
California is facing significant costs related to the immediate public health response to the COVID-19 crisis. In addition, the state will likely spend more on services such as health care and cash assistance for Californians whose incomes have fallen sharply in the wake of the statewide stay-at-home order. At the same time, the state’s primary revenue sources – income taxes and sales taxes – will be lower than anticipated due to increased unemployment, stock market declines, and reduced consumer purchases. These factors – higher spending and lower revenues – have put the state on the cusp of a substantial budget shortfall.
This guide outlines the Governor’s proposed 2020-21 budget, including revenue forecasts, funding proposals, and key reforms. The Budget Center’s analysis also points to opportunities for additional investments to improve the lives of Californians still struggling to make ends meet. Plus, learn about tax expenditures – spending that happens outside of the budget that could provide additional revenue for policymakers to share the state’s prosperity if better targeted. Finally, our new publication highlights what happens next in the state budget process.
A Budget Center Analysis of Governor Newsom’s Proposed 2020-21 Budget: On January 10, Governor Gavin Newsom released his proposed 2020-21 budget that advances a series of commitments to some of the most pressing needs facing Californians: addressing homelessness and behavioral health, providing access to affordable health coverage, and improving paid family leave so that more workers can care for their family members. The Governor forecasts revenues that are $5.8 billion higher (over a three-year “budget window” from 2018-19 to 2020-21) than previously projected in the 2019-20 budget enacted in June, driven largely by continued economic growth.