Executive Summary

On May 14, Governor Gavin Newsom released the May Revision to his proposed 2021-22 state budget, projecting $75.7 billion in additional revenues over the current fiscal year (2020-21) and budget year. The additional revenues are relative to projections in the enacted 2020-21 budget and include $38.1 billion in discretionary funds available to be allocated and $37.6 billion in constitutionally required obligations for K-12 schools and community colleges ($26.6 billion) as well as for reserves and paying down certain long-term liabilities ($11 billion). The large revenue gains are driven by high-income Californians and corporations thriving amid the COVID-19 pandemic. Federal and state cash assistance directed to Californians is also helping mitigate more dire expectations of economic decline from layoffs and evictions. In combination with direct federal aid from the American Rescue Plan (ARP: $27 billion), California’s state leaders have more than $100 billion in funds available to be invested over the current budget, and future years.

The governor proposes to make an array of investments to address the effects of the pandemic and lay the foundation for a more equitable California, including:

$8 billion in Golden State Stimulus payments to Californians earning less than $75,000 annually, including to immigrants who are undocumented.
Emergency rental assistance to cover 100% of back rent owed by Californians with low incomes and $2 billion in ARP funds for utility assistance for renters.
$12 billion in state and federal funds over two years to address homelessness.
Expanding eligibility for comprehensive Medi-Cal coverage to approximately 80,000 undocumented adults age 60 and older.
Significant increases in funding for K-12 education, including additional ongoing funding to support English learners, students from low income families, and foster youth.
Universal transitional kindergarten for all 4-year-olds in the state, phased in over four years.
100,000 new subsidized child care slots and financial assistance for child care providers using federal and state funds.
Increases in base and one-time funding for the state’s higher education systems.
Establishing college savings accounts for California children in families with low incomes.
$7 billion in ARP and state funds to address the digital divide.

While the governor’s revised 2021-22 state budget makes significant investments, California’s revenue outlook means policymakers can provide greater support and make bolder and even more equitable policy choices that meet people’s ongoing health and economic needs. This includes:

Providing ongoing funding for local public health departments critical to responding to the pandemic and future public health crises.
Allocating additional funding to undocumented Californians and their families to cover gaps in federal aid.
Expanding food assistance and comprehensive Medi-Cal coverage to all undocumented Californians, regardless of age.
Maintaining payment rates for workers who rely on California’s paid family leave and state disability insurance programs for their family care needs.
Reforming reimbursement rates to ensure that child care providers are paid fair rates.
Closing more state prisons, which disproportionately harm the lives of Black and brown Californians and waste state resources.

The May Revision also proposes expansions of tax credits and other assistance for businesses, some of which is poorly targeted and would not help the businesses that have been hardest hit by the pandemic.

State policymakers have an opportunity to put a budget plan in place that invests in the immediate and future health and economic security of all Californians, lays the foundation for a more equitable future, and in so doing, positions our state and communities to more quickly, equitably, and sustainably emerge from the recession and pandemic.

This report outlines key pieces of the 2021-22 budget proposal, with consideration for how the plan supports — or does not meet the needs of — Californians with low incomes, as well as women, Black Californians, Latinx Californians, American Indians, Pacific Islander Californians, Asian Californians, and other Californians of color.

Budget Overview

Governor’s Economic Outlook Has Improved but a Recovery Remains a Long Way Off

The governor’s revised economic outlook has improved since January and notes that both California and the nation have “started on the path to recovery” from the pandemic recession. However, the forecast also acknowledges that Californians face a long road ahead to recovery, particularly those who had been employed in the hardest-hit lowest-paying industries, like leisure and hospitality. California won’t gain back all of the jobs the state lost during the pandemic until mid-2023, according to the outlook, but for the leisure and hospitality industry, this won’t occur until the end of 2024 — three and a half years from now. The revised forecast also notes that a number of factors could slow the state’s economic recovery, including the possibility that the COVID-19 crisis worsens due to variants of the virus or vaccine hesitancy.

Revised Budget Reflects Significantly Higher Revenues Than Previously Projected

While the governor’s January budget proposal already projected that revenues over the budget window — covering fiscal years 2019-20 through 2021-22 — would exceed the projections included in the 2020 budget agreement, the Newsom administration is now estimating an even larger improvement in the revenue outlook. Specifically, the revised budget assumes General Fund revenues over the budget window will be $41.6 billion higher than estimated in January, after accounting for transfers, such as to the state’s rainy day fund. This includes upward revisions in the state’s three primary General Fund revenue sources of:

$38 billion in personal income tax revenues, largely reflecting the continued prosperity of high-income Californians, who contribute a large share of state revenues due to the state’s progressive tax system, and who have done well during the pandemic, as they have been able to continue working and reaping the benefits of stock market gains.
$4.5 billion in sales and use tax revenues, reflecting improved estimates of both consumer spending and business investment. Consumer spending has been buoyed by federal and state relief and has shifted away from services, which are generally not taxed, toward purchases of goods, which are generally taxed. Business investment is expected to be spurred by low interest rates and increased demand as the economy continues to recover.
$4.6 billion in corporation tax revenues, largely reflecting that the profits of large corporations, who pay the majority of corporate taxes, generally have not been hit as hard by the pandemic as previously anticipated and some, like tech companies, have done extremely well.

The revised budget includes some tax policy proposals and recently enacted tax policy changes that are incorporated into the governor’s revised revenue estimates for the current and subsequent fiscal years, including the Golden State Stimulus and new and expanded business tax breaks. The estimates also assume that the temporary suspension of Net Operating Losses and the limitation of business tax credits enacted through the 2020 budget agreement will not be lifted early. Additionally, the governor is proposing to make permanent the sales tax exemptions for menstrual products and diapers.

Looking at revenues on a year-to-year basis, General Fund revenues before transfers are estimated to be $179.3 billion in the current budget year (2020-21) and $181.7 in the upcoming budget year (2021-22), compared to $145 billion in 2019-20, an increase of nearly 25%.

Governor’s Revised Budget Assumes the State Will Exceed Its Constitutional Spending Limit

Voters in 1979 approved an amendment to the state’s Constitution, Proposition 4, creating a spending cap for the state, alternatively known as the State Appropriations Limit or the Gann Limit. Prop. 4 also created spending limits for all local governments. At the state level, the limit is tied to California’s 1978-79 spending, adjusted for changes in population and per capita personal income — even as the needs of Californians have dramatically changed since the disco era.

If this limit is exceeded over a two-year period, policymakers must divide revenue over that limit evenly between refunds to taxpayers and additional spending on K-14 education, unless they redirect some of those revenues toward spending categories that do not count toward the limit, such as capital spending or transfers to local governments. This means they lose the flexibility to spend those funds in ways that might address other ongoing needs of Californians, including health care, child care, and affordable housing. For an in-depth explanation of how the Gann Limit works, see the recent report released by the Legislative Analyst’s Office (LAO). For answers to frequently asked questions about the spending cap, see the Budget Center’s Gann Limit Q&A.

Due to the strong growth in revenues, the administration projects that the state will exceed the limit by $16.2 billion over the 2020-21 and 2021-22 fiscal years. The governor has proposed immediately meeting the tax refund requirement of the Gann Limit by providing an additional $8.1 billion in direct payments to Californians through a second round of the “Golden State Stimulus” that was originally enacted earlier this year, targeted to individuals and families with low and middle incomes (see Golden State Stimulus section). The remaining $8.1 billion in estimated “excess” revenues — an estimate that is likely to be revised over the next couple of budget cycles — would be allocated to K-14 education in 2022-23 (see Prop. 98 section).

The governor is proposing that the Legislature take one action to reduce, but not eliminate, the impact of the spending limit. Under current law, when school and community college districts exceed their spending limits, the state counts that excess spending toward its own limit. However, the state is not currently allowed to do the opposite: increase its own limit by the amount that other school and community college districts are under their limits. The administration’s estimate of the state spending limit for 2021-22 assumes that the Legislature will change the law and shift to the state the “room” that certain K-14 districts have under their limits. This change is estimated to reduce the amount by which the state will exceed its own spending cap by $4.6 billion. If the Legislature does not adopt this proposal or take other actions to change how the Gann Limit is implemented, the amount of revenues required to be returned to taxpayers and allocated as supplemental payments to K-14 education will be billions of dollars higher, based on current projections.

Providing direct relief to struggling Californians and ensuring that the state’s K-14 education system is adequately funded are laudable in a year of unprecedented challenges. However, the spending cap, if left unchanged, will threaten state leaders’ ability to support many basic services, such as health care, which have costs that are likely to rise faster than the growth in the state’s population and per capita income. Additionally, the limit could thwart policymakers’ ability to make major investments that require new revenues, such as health care for all Californians or ongoing investments to prevent and end homelessness in the state.

State leaders should explore the available options to change the Gann limit, including the revision proposed by the governor and other options covered by the LAO. Doing so would provide policymakers with greater flexibility to address the challenges facing Californians, which are not the same as those that existed in the late 1970s.

Stronger-Than-Expected Revenues Allow State to Build Reserves to $24 Billion

California 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 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.

The current year (2020-21) budget projected drawing down $8.8 billion in reserves — $7.8 billion of $16.1 billion in available funds from the BSA; all of approximately $500 million in the PSSSA; and $450 million of the available $900 million in the Safety Net Reserve — based on projections of declining revenues due to the pandemic. The enacted budget also projected that $2.6 billion would remain in the SFEU as of June 30, 2021.

However, stronger-than-expected revenue collections result in changes to the BSA, PSSSA, and SFEU balances for the prior fiscal year (2019-20), the current fiscal year (2020-21), and projections in the May Revision. The revised budget estimates:

A total BSA balance of $12.5 billion in 2020-21, growing to $15.9 billion in 2021-22;
A PSSSA balance of $2 billion in 2020-21, growing to $4.6 billion in 2021-22; and
A staggering SFEU balance of $24.3 billion as of June 30, 2021, reflecting the state’s intake of unanticipated revenues, dropping to $3.4 billion by June 30, 2022.

While previously expected draw-downs of state reserves are restored and the total reserve levels increased, the May Revision leaves the Safety Net Reserve at its draw-down level of $450 million.

Taking into account the BSA, PSSSA, Safety Net Reserve, and SFEU, the governor’s proposal would build state reserves to a total of $24.4 billion in 2021-22.

May Revision Continues to Pay Down Unfunded Liabilities

The May Revision includes required contributions to state-run retirement systems: the California Public Employees’ Retirement System (CalPERS) and the California State Teachers’ Retirement System (CalSTRS). CalPERS and CalSTRS, like many retirement systems, are not funded at levels that will keep up with future benefits guaranteed to workers, resulting in the state needing to make higher annual contributions in order to pay down unfunded liabilities. In recent budget agreements, state leaders have also agreed to make supplemental payments to the two systems in order to help pay down those unfunded liabilities.

The governor’s revised proposal includes required contributions to CalPERS ($6.1 billion total, $3.2 billion General Fund) and CalSTRS ($3.9 billion General Fund). In addition, the administration proposes to make one-time supplemental payments in 2021-22 to CalPERS ($1.9 billion, compared to $1.5 billion in the January proposal), while maintaining the governor’s January proposal of a one-time payment of $410 million to CalSTRS using funding required to be set aside by Prop. 2 for paying down budgetary debt. (see Reserves section for more on Prop. 2)

Governor Proposes Expansions of Grants, Tax Credits, and Other Assistance for Businesses

The governor’s proposals for business relief and economic development are very similar to his January proposal, with some additional proposed allocations of federal ARP funds. Specifically, the revised budget:

Includes an additional $1.5 billion in ARP funds for small business grants on top of the $2.5 billion approved last November and this February, bringing the total to $4 billion. The grants would be allocated in three new rounds, the first two of which would target businesses on the waiting list for previous rounds of funding.
Indicates the administration’s intention to apply for an estimated $895 million in ARP funds for the State Small Business Credit Initiative to assist small businesses in accessing capital.
Maintains the January proposal for a one-time $430 million increase to the California Competes Tax Credit, meant to incentivize businesses to create jobs in California. The proposal includes $250 million in ARP funds for a one-time California Competes grant program and $180 million for a one-time increase to the tax credit program.
Proposes $250 million in one-time ARP funds be used to provide assistance to California ports that have suffered revenue losses during the pandemic.
Maintains the January proposal to increase the Main Street Small Business Tax Credit by $100 million. The credit was created in 2020 and the total allocation was capped at $100 million, of which $47 million is left to be allocated, so in total $147 million would be available to allocate in a second credit round.
Maintains the January proposal for a one-time, $100 million expansion of an existing manufacturing sales tax exclusion, the California Alternative Energy and Advanced Transportation Financing Authority, doubling the size of the program for 2021-22.
Reduces the proposal for additional funding for the Infrastructure and Economic Development Bank (IBank) to provide loan guarantees and other supports for small businesses from $100 million to $70 million to reflect that additional assistance is expected to be available under the federally funded State Small Business Credit Initiative.
Proposes a one-time $30 million increase for the Film and Television Tax Credit to incentivize productions to relocate from outside the state.
Maintains the January proposal to create an elective tax on S corporations and an offsetting credit against the personal income taxes of the corporations’ shareholders. This is intended to allow business owners to avoid the $10,000 limit on federal deductions of state and local taxes created by the 2017 Tax Cuts and Jobs Act.

Additionally, policymakers recently enacted a law providing tax breaks to businesses who have had loans forgiven from the federal Paycheck Protection Program or received advance grants from the federal Economic Injury Disaster Loan program. This law excludes income from forgiven loans and advance grants from taxable income, and also allows businesses to deduct expenses covered with those loans or grants. This pair of tax breaks will reduce state revenues by an estimated $6.2 billion over six years.

While it is appropriate to provide relief to businesses that have been hit hard by the pandemic, some of these tax breaks are not well-targeted to those businesses and may not be effective in improving the state’s economy. Recent research has found that film tax credits do not have notable effects on a state’s wages, jobs or economy. And while the California Competes credit is better targeted than many other economic development incentives, there are still concerns about windfall benefits for businesses that would have created or maintained jobs in California even without receiving the credit. Additionally, recent research suggests that the positive employment effects of the California Competes credit are larger for workers living in areas with higher income and education levels than for those in areas with lower income and education levels. If the goal of expanding these credits is to promote economic recovery, the additional revenue lost to these expansions could be better targeted through other programs to help workers and businesses most in need of assistance.

Health

The May Revision Misses Key Opportunity to Invest in Local Public Health Departments

While the budget consists of state and federal funding for COVID-19 response, the May Revision does not include new investments for local public health departments. Due to chronic underfunding in public health systems, counties and cities across the state were not adequately prepared to respond to emerging health threats. Many communities suffered largely due to the state’s lack of preparedness. In particular, Black, Latinx, and Native Hawaiian and Pacific Islander Californians experienced higher rates of illness and death due to the virus. These health inequities are the result of historic and ongoing structural racism that deny many communities the opportunity to be healthy and thrive. The intersection of the COVID-19 pandemic as well as structural racism has underscored the need to strengthen public health systems.

Ensuring that California counties and cities have the resources needed to overcome COVID-19 as well as other threats to population health is vital — to address this pandemic and future public health needs. Public health officials throughout the state have expressed that much more support is needed to adequately bolster public health infrastructure at the local level, including information systems, workforce, and health promotion programs. State policymakers must provide ongoing and sustainable funding for local public health departments in order to overcome COVID-19 as well as other population health threats. Given that the goal of public health is to promote and protect the health of people and communities, state policymakers and public health leaders can also begin to minimize, neutralize, and dismantle the systems of racism that create inequalities in health for Californians.

May Revision Expands Comprehensive Medi-Cal Coverage to Older Adults Who Are Undocumented

Building on the federal Affordable Care Act (ACA), California has substantially expanded access to health coverage in recent years. For example, more than 13 million Californians with modest incomes — roughly 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 1.4 million Californians with incomes up to 600% of the federal poverty line ($76,560 for an individual) receive federal subsidies, state subsidies, or both in order to reduce the cost of coverage purchased through Covered California, our state’s health insurance marketplace. In addition, many more Californians may decide to purchase a subsidized Covered California plan in response to the generous new federal premium subsidies provided by the American Rescue Plan. Nonetheless, millions of people — including many immigrants who are undocumented — remain uninsured, health care costs are still rising, and many Californians continue to face high monthly premiums and excessive out-of-pocket costs, such as copays and deductibles, when they use health care services.

The May Revision:

Expands eligibility for comprehensive Medi-Cal coverage to seniors regardless of immigration status. Federal policy prohibits states from using federal dollars to provide comprehensive (“full scope”) health coverage to undocumented immigrants through the Medicaid program. States, however, may use their own funds to provide such coverage. In recent years, California has used this option to extend full-scope Medi-Cal coverage to undocumented immigrants under age 26 who otherwise qualify for the program. The Governor proposes to expand this state policy to include undocumented adults age 60 or older, no sooner than May 1, 2022. The administration estimates this proposal would extend “full-scope” Medi-Cal coverage to about 80,000 adults who are undocumented. This expansion would have a partial-year cost of $69 million ($50 million General Fund) in 2021-22, rising to a projected ongoing annual cost of $1 billion ($859 million General Fund). The governor’s proposal would continue to leave undocumented immigrants ages 26 to 59 without access to comprehensive Medi-Cal coverage. Upholding racist, exclusionary policies that block some undocumented Californians from vital health coverage is harmful to the state’s collective health and perpetuates racial health disparities. State policymakers should expand comprehensive Medi-Cal coverage to all undocumented Californians who are otherwise eligible for the program.

In addition, the governor’s revised budget:

Proposes to pursue a new federal option allowing states to extend, to 12 months, pregnancy-related, postpartum Medicaid coverage — well beyond the current 60-day limit. This five-year option, which takes effect on April 1, 2022, is included in the federal American Rescue Plan. Implementing this extension would cost $90.5 million ($45.3 million General Fund) in 2021-22 and approximately $362 million ($181 million General Fund) annually from 2022-23 to 2027-28.
Adds a doula benefit to the Medi-Cal program, effective January 1, 2022. This new benefit would cost $403,000 ($152,000 General Fund) in 2021-22 and approximately $4.4 million ($1.7 million General Fund) per year when the benefit is fully implemented.
Proposes to allow community health workers to provide benefits and services to Medi-Cal enrollees, effective January 1, 2022. This change would initially cost $16.3 million ($6.2 million General Fund), rising to around $201 million ($76 million General Fund) by 2026-27.
Provides $9.3 million General Fund to continue providing medically tailored meals as California prepares to implement the administration’s related CalAIM proposal. This one-time funding would support these meals “between the conclusion of the existing pilot program in 2021 and when medically tailored meals become available as an option for In-Lieu of Service (ILOS) under CalAIM,” according to the May Revision. (See CalAIM section.)
Proposes to establish Medi-Cal payment rates for audio-only telehealth, with the goal of continuing the telehealth flexibilities that have been available during the pandemic while also ensuring access to in-person care. Audio-only rates would be set at 65% of the standard fee-for-service rates. Providers could claim reimbursement for audio-only care so long as they 1) are located in California or “border communities” and 2) are able to provide in-person services to each Medi-Cal enrollee served by audio-only telehealth.

Revised Budget Builds on Efforts to Improve Health Outcomes Through Medi-Cal Reform

The administration sustains previously proposed funding for the ambitious reform effort known as CalAIM (California Advancing and Innovating Medi-Cal) that was originally introduced in 2019. This initiative builds upon previous pilot programs targeted to coordinate physical health, behavioral health, and social services in a patient-centered manner with the goal of improving health and well-being. CalAIM also aims to improve quality outcomes, reduce health disparities, reduce complexity across all delivery systems, and implement value-based initiatives and payment reform. The main goal of this initiative is to better support millions of Californians enrolled in Medi-Cal — particularly those experiencing homelessness, children with complex medical conditions, children and youth in foster care, Californians involved with the justice system, and older adults — who often have to navigate multiple complex delivery systems to receive health-related services.

The May Revision now allocates $1.6 billion total funds ($673 million General Fund) for 2021-22 and $1.5 billion total funds ($746.6 General Fund) in 2022-23 for CalAIM reforms. The administration proposes additional efforts within CalAIM that were not previously included in the January budget, such as:

$315 million one-time funds ($31.5 million General Fund) for Medi-Cal Population Health Management. Generally, this effort would centralize administrative and clinical data for the Department of Health Care Services, Managed Care Plans, counties, providers, beneficiaries, and other partners to support holistic delivery of care and reduce burden for Medi-Cal recipients. The proposed funds allocate $300 million total funds ($30 million General Fund) for local assistance funding and $15 million total funds ($1.5 million General Fund) for state operations.
$200 million one-time funds ($100 million General Fund) for the Medi-Cal Providing Access and Transforming Health (PATH). PATH supports are designed to help coordinate justice agencies and Medi-Cal coverage services 30 days prior for justice-involved Californians to ensure effective pre-release care.
$9.3 million one-time General Fund in 2021-22 for the Medically Tailored Meals Pilot Program expansion. These one-time funds are separate from the funding previously allocated to this program. It extends the services to select eligible Medi-Cal recipients until it becomes eligible as an option for In-Lieu of Service under CalAIM.

Substantial reforms to the Medi-Cal program as well as the level of federal funding that will be provided must be negotiated with the federal government through the Medicaid waiver process. As such, CalAIM implementation will depend on the availability of funding and federal approval.

Governor’s May Revision Provides Support for Californians’ Mental Health and Substance Use Disorder Needs

Behavioral health services — mental health care and/or treatment for substance use — are primarily provided by California’s 58 counties, with funding from the state and federal governments. Before the COVID-19 pandemic, Californians with behavioral health conditions confronted many challenges in accessing services that are delivered by multiple complex systems. The heightened stress, grief, isolation, and depression highlight the need to prepare for a possible behavioral health crisis on the horizon.

Recognizing the need to invest in behavioral health services, especially for children, the administration builds on initiatives that were included in the proposed budget to support behavioral health. Specifically, the revised budget includes:

Significant investments for the Children and Youth Behavioral Health Initiative, which aims to transform California’s behavioral health system for children and youth. The revised budget includes $1 billion from ARP in 2021-22, $1.7 billion ($1.3 billion ARP, $300 million General Fund, and $100 million Federal Trust Fund) in 2022-23, and $431 million ($300 million General Fund) ongoing. The goal of this initiative is to better connect children and youth to behavioral health care, invest in school-based services, and expand the infrastructure for providing behavioral health care. Some of these investments relate to the Behavioral Health Continuum Infrastructure Program, described below.
Increased funding for the Behavioral Health Continuum Infrastructure Program. In January, the Governor proposed $750 million one-time General Fund, available over three years, for competitive grants to expand the community continuum of behavioral health treatment resources. The May Revision provides an additional $10 million from the ARP and shifts $300 million General Fund to the ARP.
Additional support for youth in foster care. The revised budget includes about $39 million General Fund to assist counties with serving foster youth with behavioral health conditions.
Funding to treat and prevent Adverse Childhood Experiences (ACEs), which are defined as traumatic events that occur before age 18. The May Revision includes $12.4 million one-time General Fund for demonstration projects focused on researching, treating, and preventing ACEs.
An augmentation for the Mental Health Student Services Act Partnership Grant Program, which funds partnerships between county behavioral health departments and schools. The revised budget includes $30 million one-time Mental Health Services Fund for the Mental Health Student Services Act partnership grants.

Homelessness & Housing

Governor Proposes $12 Billion to Address Homelessness by Acquiring Housing and Meeting Needs of Specific Populations

California has more than 25% of the nation’s population of homeless individuals, with more than 160,000 homeless residents on a given night as of January 2020. Black Californians bear a disproportionate burden of homelessness, making up about 1 in 3 residents experiencing homelessness but only 6.5% of the overall state population. Recognizing the state’s serious homelessness challenge, which Californians consistently cite as a key concern, the governor identifies homelessness as a central focus of the May Revision. The budget proposal includes a total investment of approximately $12 billion over two years in state and federal funds to address homelessness.

The May Revision includes roughly $7 billion overall for acquisition and rehabilitation of three types of housing:

Hotels, motels, and other buildings, for conversion to interim or permanent housing for individuals experiencing homelessness, through the Homekey program, using a total of $3.5 billion in one-time funds over two years (an increase of $2.75 billion over the January proposal), including $1 billion targeted to housing for homeless families.
Behavioral health treatment facilities, with a total of $2.45 billion over two years (including $1.9 billion General Fund and $530 million ARP funds), more than tripling the total funds proposed in January.
Community board and care facilities serving seniors and adults, through a total of $1 billion over two years (including $550 million one-time General Fund and $450 million ARP funds). This represents an increase of $750 million over the January proposal.

While Homekey properties specifically serve people experiencing homelessness, it is not clear that these behavioral health or community care facilities would exclusively or primarily house individuals experiencing or at high risk of becoming homeless, as the Legislative Analyst’s Office noted in response to the January budget proposal.

Several proposed investments address homelessness among families with children:

$40 million one-time General Fund available over five years for “family homelessness challenge grants” and technical assistance through the Homeless Coordinating and Financing Council (HCFC) to help local jurisdictions develop plans to achieve functional elimination of family homelessness.
Two-year expansion of the CalWORKs Housing Support Program, which serves CalWORKs families experiencing homelessness, through $475 million General Fund in 2021-22 and 2022-23.
Two-year expansion of the Bringing Families Home program, which serves families experiencing homelessness in the child welfare system, through $280 million General Fund in 2021-22 and 2022-23.

Additional funding proposals address the needs of special populations of individuals experiencing homelessness:

Individuals currently housed in Project Roomkey non-congregate shelters: $150 million one-time General Fund to support these individuals in transitioning into permanent housing when full federal reimbursement for Roomkey operations sunsets, currently set for September 2021.
Individuals living in homeless encampments: $50 million one-time General Fund for HCFC to assist local governments with “resolving critical encampments” and transitioning individuals into permanent housing, and $2.7 million one-time General Fund for Caltrans Encampment Coordinators.
Individuals eligible for disability benefits through SSI/SSP: $175 million General Fund annually through 2023-24 for the Housing and Disability Advocacy Program, which provides benefits advocacy and housing assistance for this population.
Individuals served by Adult Protective Services: $100 million General Fund annually through 2022-23 for Home Safe, which provides housing supports for adults potentially in need or involved in Adult Protective Services.
Veterans who have been chronically homeless: $25 million General Fund one-time to provide on-site supportive services for formerly chronically homeless veterans living in supportive housing.

The governor’s proposal also emphasizes the need to increase accountability for the planning and implementation of homelessness resources, and proposes $5.6 million one-time General Fund for an HCFC assessment of existing local homeless service providers and state-funded homelessness programs.

Overall, the May Revision proposes substantial investments to address homelessness, which is appropriate given the scale of the challenge. Property acquisition, a major focus of the proposal, is also a productive use of significant one-time funds. At the same time, the budget proposal does not address how the ongoing operations of acquired properties would be supported. More broadly, the proposal does not address the need for long-term, flexible, streamlined, substantial funding to support local efforts to address homelessness, despite the fact that the Assembly and the Senate and advocates have identified this type of state support as a priority.

Governor Proposes Using Federal Funds to Help Struggling Renters and Develop Affordable Housing

Even before the COVID-19 recession, more than half of California’s renter households had unaffordable housing costs, with Black and Latinx Californians most likely to live in unaffordable housing. Job losses during the pandemic continue to be concentrated among lower-wage workers, who are least likely to have savings to cover housing costs in the face of lost income.

Federal funds are available to address the urgent needs of renters during the pandemic through the December Consolidated Appropriations Act and the more recent American Rescue Plan (ARP), which combined provided $5.2 billion for emergency rental assistance and back rent owed by Californians with low incomes. Governor Newsom proposes modifying the criteria for use of these funds to cover 100% of tenants’ back rent and rent due for several months into the future. The governor does not propose extending the state eviction moratorium beyond its current expiration date of June 30, 2021. The May Revision also proposes $2 billion in ARP funds for utility assistance for renters, including $1 billion for direct payments to water systems to cover water debt accumulated by households during the pandemic.

To address California’s long-term affordable housing shortfall, the governor’s proposal includes $1.75 billion in ARP funds for “shovel-ready” projects that are waiting for potential future state funding, representing more than 6,300 affordable housing units. The May Revision also proposes $4 billion one-time General Fund over two years to develop affordable student housing through the University of California, California State University, and California Community Colleges (see UC/CSU and CCC sections).

Additional housing investments proposed in the May Revision include:

Legal assistance for eviction and foreclosure prevention: $20 million ARP funds per year for the next 3 years ($60 million total) for legal aid services for tenants and mortgage holders, administered through the Judicial Council.
Regional housing planning and implementation for infill projects: $500 million ARP funds to provide grants to regional entities to plan and implement infill developments, through the Department of Housing and Community Development (HCD).
Affordable housing preservation: $300 million ARP funds to preserve affordability for HCD legacy projects.
First-time homebuyer assistance: $100 million ARP funds to expand the existing program administered by the California Housing Finance Agency (CalHFA).
ADU financing for low- and moderate-income property owners: $81 million ARP funds, added to $19 million allocated in the 2019-20 budget, for $100 million total, administered through CalHFA.
State excess land development: $45 million ARP funds for infrastructure for housing projects on state-owned land.
Seasonal farmworker housing: $30 million total one-time General Fund (an increase of $20 million from the January proposal) for deferred maintenance and habitability improvements.

Economic Security

Governor Proposes Second Golden State Stimulus for Californians with Low and Moderate Incomes

The governor’s revised budget proposes providing direct cash payments to Californians with incomes of $75,000 or less through a second Golden State Stimulus package. The administration expects around 9.9 million tax filers to benefit and expects these payments to cost just over $8 billion. Specifically, the second Golden State Stimulus would provide:

A $600 payment to tax filers who did not receive the first Golden State Stimulus payments. These are Californians who file taxes with Social Security numbers (SSNs) and have incomes between $30,000 and $75,000.
An additional $500 payment to Californians who file taxes with SSNs, have incomes of $75,000 or less, and have dependents.
A $1,000 payment to Californians who file taxes with Individual Taxpayer Identification Numbers (ITINs), have incomes of $75,000 or less, and have dependents. People who file taxes with ITINs, who are primarily undocumented Californians or mixed status families, were excluded from thousands of dollars in federal stimulus payments during the pandemic.

Under the governor’s proposal, the first and second Golden State Stimulus combined would provide a $1,100 payment to all Californians with low and moderate incomes who file with SSNs if they have dependents or a $600 payment if they do not. Californians who file with ITINs and have incomes of $30,000 or less would receive twice that amount — $2,200 for those with dependents or $1,200 for those without. Californians who file with ITINs and have incomes between $30,000 and $75,000 would receive a payment of $1,600 if they have dependents or $600 if they do not.

Although the governor’s proposal would provide larger payments to most Californians who file with ITINs, it would replace only a fraction of the federal stimulus payments these families and individuals were denied. For example, a two-parent family with two children that files with an ITIN was denied between $8,600 and $11,400 in federal stimulus, depending on whether the children had SSNs. Under the governor’s proposal, the first and second Golden State Stimulus combined would replace at most only about a quarter of the federal stimulus this family of four was unable to receive.

Moreover, undocumented Californians who are not supporting children are excluded entirely from the second Golden State Stimulus payment, even as they are barred from most public supports, including food assistance through CalFresh and refundable federal income tax credits.

The governor’s proposal also leaves out many undocumented Californians and mixed status families who have been unable to obtain or renew ITINs. The Internal Revenue Service (IRS) has a significant backlog of ITIN applications and advocates report that it is currently taking applicants at least 20 weeks for the IRS to process their applications. California could help more undocumented residents access the Golden State Stimulus, as well as tax credits including the California Earned Income Tax Credit (CalEITC) and federal Child Tax Credit by dedicating resources to help people apply for or renew ITINs. Alternatively, the state could accept a pending ITIN application or renewal as proof of eligibility for the state stimulus payments. In addition, California could supplement the Golden State Stimulus with payments to undocumented residents who do not yet have ITINs. Several states, including New York, have created “excluded worker” funds to replace the federal stimulus payments and/or unemployment benefits undocumented people have been denied, and they have not made reciept of these funds contingent on having an ITIN.

Governor Proposes Investing in Basic Income Pilots

The governor’s revised budget includes $35 million General Fund over five years for basic income pilot programs administered by cities or counties. Basic income programs provide regular cash payments to people with no requirements for how the money must be spent. With growing interest in the concept of basic income — also called guaranteed income — several pilot programs around the state and nation are currently underway or in the planning stages, and one, the Stockton Economic Empowerment Demonstration (SEED), just concluded. The revised budget specifies that in order to benefit from state funds, basic income pilots must match the state funds received and must target the program to Californians with low incomes.

As evidence grows that guaranteed income is good policy, the state should scale up such efforts by significantly expanding the state’s Earned Income Tax Credit (CalEITC), which could easily serve as a basic income program at the state level.

Governor Proposes Extending Some Benefits to Immigrants Who Are Undocumented, Misses Opportunity to Fill Gaps in Federal Aid

California has the largest share of immigrant residents of any state and is home to an estimated 2 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, but 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 the federal EITC and unemployment benefits. The state of California has made important strides during the pandemic to support undocumented Californians, and the governor’s revised budget proposes important expansions. Specifically, the May Revision:

Proposes a $1,000 payment to Californians who file taxes with Individual Taxpayer Identification Numbers (ITINs), have incomes of $75,000 or less, and have dependents. (See Golden State Stimulus section).
Expands eligibility for comprehensive Medi-Cal coverage to Californians age 60 or older regardless of immigration status. (See Health Coverage & Access section).
Provides $105 million one-time General Fund for the Rapid Response Fund to support migrant families at California’s southern border and other emergency responses.
Includes $50 million Proposition 98 General Fund to support vocational training and English as a Second Language programs at community colleges.
Allocates $25 million one-time General Fund for Deferred Action for Childhood Arrivals (DACA) and naturalization filing fees.
Proposes $20 million General Fund and $5 million Prop. 98 General Fund to support unaccompanied undocumented minors through legal services, the Opportunities for Youth pilot project, and the California Newcomer Education and Well-Being Project.

State policymakers must step up to fill the gap in federal relief efforts that have left out Californians who are undocumented. Under the governor’s proposal, the first and second Golden State Stimulus payments combined would replace only a fraction of the federal stimulus payments these families and individuals were denied. This proposal also leaves out many undocumented Californians and mixed status families who have been unable to obtain or renew ITINs. In addition, the administration misses an opportunity to expand both Medi-Cal and food assistance to all income-eligible Californians regardless of immigration status. California policymakers should lead in this time of crisis by prioritizing the urgent needs of undocumented immigrants and their families in order to make our support systems more equitable and our state’s economy more resilient.

The Administration’s Revised Proposal Makes Some Adjustments to the CalWORKs Program, Anticipates Slow Caseload Growth

The California Work Opportunity and Responsibility to Kids (CalWORKs) program provides modest cash assistance for low-income children while helping parents overcome barriers to employment and find jobs. Even before the COVID-19 crisis, CalWORKs primarily served children of color, who faced higher rates of economic insecurity than did white children. As millions of California workers — especially workers of color — have lost their jobs or seen reduced wages due to the public health emergency and recession, CalWORKs is a particularly critical source of support.

In his revised spending plan, the governor proposes allocating $6.8 billion in local, state, and federal TANF funds to support the CalWORKs program in 2021-22. This amount is a decrease from his January proposal of $7.4 billion as the administration projects slower caseload growth than previously anticipated.

The governor also proposes $142.9 million for a 5.3% grant increase, up from $50.1 million in January. This increase would not be funded through the General Fund but instead through the Child Poverty and Family Supplemental Support Subaccounts of the Local Revenue Fund.

In addition, the revised proposal makes changes to how the Department of Social Services collects overpayments due to administrative error. Instead of reducing a family’s aid payment by 10%, the administration proposes a 5% grant reduction. This change would apply to overpayments occurring between April 2020 through the end of the pandemic or June 30, 2022, whichever is sooner. The administration would also reduce the timeframe to identify overpayments for collection from 5 years to 2 years.

Finally, the May Revision includes funding to support CalWORKs families experiencing housing instability and homelessness in both the 2021-22 and 2022-23 state fiscal years (see Homelessness section). This support includes $475 million General Fund to expand the Housing Support Program and $280 million General Fund for families involved in the child welfare system who are experiencing homelessness.

May Revision Expands Investment in K-12 School Nutrition, Misses Opportunity to Expand Food Assistance to All Californians Regardless of Immigration Status

Food hardship has skyrocketed in California due to the COVID-19 health and economic crisis. This is particularly true for Black and Latinx Californians and other Californians of color who have been hit hard by the pandemic and are much more likely to not have enough food to eat. The governor’s proposed budget includes a number of food and nutrition proposals to help address food hardship in California but misses key opportunities to expand food assistance to all Californias regardless of immigration status. Specifically, the May Revision:

Includes $150 million ongoing Proposition 98 investment in K-12 school nutrition. Funding would go to local educational agencies that participate in one of the “federal universal meal provisions.” Participation in these programs allow schools to leverage federal funding to provide student access to free breakfast and lunch.
Proposes $100 million one-time Prop. 98 to support K-12 school kitchen upgrades and training for cafeteria staff.
Increases by $30 million ongoing Prop. 98 funds to support California Community Colleges students’ basic needs, including access to food. The additional funding would support colleges setting up basic needs centers and hiring basic needs coordinators.
Allocates $2 million ($1.1 million General Fund) to continue CalFresh outreach efforts targeting older adults. CalFresh is California’s version of the federal Supplemental Nutrition Assistance Program (SNAP), which provides food assistance to individuals and families with low incomes. The May Revision proposes to provide this funding in the upcoming 2021-22 fiscal year and assumes it would be ongoing, meaning that annual allocations would continue in subsequent fiscal years.

The May Revision misses a key opportunity to expand food assistance to all Californians regardless of immigration status. The California Food Assistance Program (CFAP) provides state-funded food assistance to “qualified” immigrants who are not eligible for CalFresh. However, undocumented Californians remain ineligible. Exclusion from basic supports, such as food assistance, is one reason Californians in families that include undocumented immigrants are more likely to live in poverty. Over half of children in undocumented households and nearly 40% of children in mixed status households lived in poverty in 2018 — poverty rates that are roughly 3 to 4 times higher than that for children in non-immigrant families. Policymakers have the fiscal space to dismantle these racist and xenophobic policies by extending food assistance to all Californians who are ineligible for federal benefits.

May Revision Provides Partial Plan for Federal Child Care Relief Funds, Including 100,000 New Spaces for Children

California’s subsidized child care and development system provides assistance for working parents with low and moderate incomes who are struggling to afford the cost of child care. During the pandemic, federal policymakers provided substantial funding to states to ensure that child care providers who were already operating on thin margins were able to keep their doors open and to ensure that working parents and children did not lose access to care. To date, California’s share of federal relief funding for child care totals $5.1 billion — $350 million from the CARES Act, $964 million from the Coronavirus Response and Relief Supplemental Appropriations Act, and $3.8 billion from the American Rescue Plan. The state has not yet allocated $579 million of Supplemental Appropriations Act funding or the ARP funding.

The May Revision proposes to use the remaining Supplemental Appropriations funding for the following:

$205.5 million for per-child stipends for subsidized child care and state preschool providers. This is the third round of stipends the state has administered with federal relief funds. Providers will receive $600 per subsidized child in their care.
$176.9 million for one-time stipends to all licensed child care providers in California. Family child care home providers will receive $3,500 and licensed centers will receive $3,500 to $6,500 based on licensed capacity.
$70 million to continue a “hold harmless” policy for 2021-22. Subsidized providers are typically paid based on attendance, not enrollment. This policy ensures that providers do not lose significant funding when children are absent due to the pandemic.
$60 million to waive family fees for eligible families through 2021-22. Some families receiving subsidized care pay a family fee for the service, which is often unaffordable for families barely getting by. The May Revision would waive these fees, but budget documents do not clearly define which families will be eligible for the waiver.
$31 million for providers accepting vouchers who have to temporarily close due to COVID-19. This funding is for providers who must close for health and safety reasons and can be used for up to 16 non-operational days during the 2021-22 fiscal year.
$25 million for the California Child Care Initiative Project. The aim of this project is to increase child care capacity for infants and toddlers in areas without providers via new licensed family child care homes. Federal funds for this project are available through September 30, 2023.
$10.6 million to enhance mental health consultations for providers. This funding is for the California Inclusion and Behavior Consultation services, which provides consulting support and assistance to providers to better equip them to help children and families navigate stress and trauma. Federal funds for this purpose are available through September 30, 2023.

The May Revision also provides a partial plan for the ARP dollars, but full details have not yet been provided. Specifically, the May Revision:

Provides $250 million one-time federal ARP funds for child care facilities in areas of the state with few providers. In response to the COVID-19 pandemic, the 2020-21 budget agreement eliminated $263 million for competitive facility grants that was part of the 2019-20 budget agreement. The May Revision restores nearly all of this funding with one-time federal dollars to build new facilities or retrofit existing facilities, but likely falls short of providing enough resources to address the documented need for child care facilities in the state.
Provides $10 million one-time ARP Funds for the Child Care Resource and Referral Program. This funding is meant to enhance the role of Resource and Referral agencies in regards to facilities, capacity, and data collection processes. Funding for the Resource and Referral Program has actually decreased over time, after adjusting for inflation, and additional ongoing funding is necessary to maintain services.

The May Revision also proposes to dramatically increase the capacity of the child care system and to fund a quality-improvement initiative, but details on these items were not provided in budget documents. This includes:

100,000 new subsidized child care spaces. Details are not available about how these spaces will be funded, how they will be distributed across programs, or if they are term-limited spaces. The Department of Social Services budget documents state that the Alternative Payment Program, the Migrant Alternative Payment Program, and the Emergency Child Care Bridge program will expand in October 2021 and the General Child Care Program will expand in April 2022.
$20 million federal funds for a multi-year quality improvement initiative. Led by the Department of Social Services, stakeholders will focus on quality improvement and supports while also addressing inequities. Details on the specific federal funding source was not provided.

The May Revision also commits a small amount of state funds to the subsidized child care system, including $83 million in Prop. 64 Cannabis Funds for 6,500 spaces, $6 million ongoing General Fund to modernize payment systems, and $4.8 General Fund to continue building a child care data system, but it is unclear if this system will connect or overlap with the governor’s Cradle to Career data system.

Federal relief funds are meant to stabilize the child care system after the tremendous shock of the COVID-19 health and economic crisis, and provide an opportunity for state leaders to rebuild the subsidized child care system in California from the ground up. However, ongoing state and federal funding is needed to ensure that families have access to affordable child care and providers and child care professionals are paid fair and just rates. The May Revision misses a key opportunity to align state commitments with ongoing needs.

May Revision Fails to Maintain Payment Rates for California Workers Who Need Paid Time Off

California’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. Governor Newsom’s paid family leave task force and Master Plan for Early Learning and Care both recommended that payment rates be increased even further — up to 90% for some workers to increase access for workers paid low wages. Without action, payment rates will revert to just 55% of earnings at the end of 2021. The COVID-19 pandemic has illustrated just how important paid time off from work is, but the administration’s revised budget does not maintain payment rates for these critical programs beyond 2021.

Due in part to the jobs lost during the recession, there has been a decrease in contributions to the Disability Insurance Fund. Based on the most recent fund forecast from the Employment Development Department released in October 2020, the Disability Insurance Fund balance may drop below a level considered adequate. To avoid insolvency, the administration typically increases taxes on workers, but Californians can’t afford a tax increase after weathering the COVID-19 health and economic crisis. The administration could avoid increasing taxes on workers by using state or federal dollars to provide a one-time deposit into the Disability Insurance Fund, but this provision is not included in the May Revision. Instead, Governor Newsom proposes to provide even more aid to businesses in the state by making a $1.1 billion deposit into the Unemployment Insurance trust fund using federal relief dollars. This frees employers from part of their obligation in future years.

Governor Proposes State Increase for SSI/SSP Grants, Makes Additional Investments in Services for Older Adults and People with Disabilities

Supplemental 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 funded with both federal (SSI) and state (SSP) dollars. State policymakers made deep cuts to the SSP portion of these grants to help close budget shortfalls that emerged after the onset of the Great Recession in 2007. Since then, state policymakers have provided only one increase to the state’s SSP portion of the grant — a 2.76% boost that took effect in January 2017, resulting in monthly SSP grant levels of $160.72 for individuals and $407.14 for couples, which continue to remain in effect.

The governor proposes to boost — as of January 1, 2022 — the state’s maximum SSP grants to at least the levels that were in effect on January 1, 2011. For individual SSI/SSP recipients living independently, the maximum SSP grant on that date was $171. This means the governor’s proposal would raise the maximum monthly grant for individuals from the current $160.72 to $171 (a 6.4% increase). However, the governor’s proposal would still leave the maximum monthly SSP grant for individuals well below its peak level of $233 in 2009.

The governor proposes additional investments aimed at assisting older adults and people with disabilities. For example, the May Revision:

Proposes to expand comprehensive Medi-Cal coverage to income-eligible adults age 60 and older regardless of immigration status. The administration estimates this proposal would extend “full-scope” Medi-Cal coverage to about 80,000 adults who are undocumented. (See the Health Coverage & Access section.)
Proposes $500 million each year for the next two fiscal years — a total of $1 billion — to fund community care facilities serving seniors and other adults. These funds would be used to build, acquire, and/or rehabilitate these care facilities.
Proposes $175 million General Fund each year the next three fiscal years — a total of $525 million — to support the Housing and Disability Advocacy Program. This program assists people with disabilities who are experiencing homelessness.
Includes $106 million General Fund to help older adults recover from the isolation and health impacts of the pandemic. These funds would boost service levels provided by several programs — including Senior Nutrition, Senior Legal Aid, and Senior Digital Assistance — and would be available to be spent over three fiscal years.
Proposes $100 million General Fund each year for the next two fiscal years — a total of $200 million — to support the Home Safe program. This program provides health, safety, and housing supports to people involved in or at risk of involvement in Adult Protective Services. The governor also signaled his support for providing an additional $100 million for Home Safe in the 2022-23, which begins on July 1, 2022.
Includes $12.5 million General Fund in 2021-22 to address Alzheimer’s disease. These funds would be used for several purposes, including promoting public awareness and improving standards of care, and would be in addition to the $17 million for Alzheimer’s that the governor included in his January proposed budget.
Allocates $2 million ($1.1 million General Fund) to continue CalFresh outreach efforts targeting older adults. CalFresh is California’s version of the federal Supplemental Nutrition Assistance Program (SNAP), which provides food assistance to individuals and families with low incomes. The May Revision proposes to provide this funding in the upcoming 2021-22 fiscal year and assumes it would be ongoing, meaning that annual allocations would continue in subsequent fiscal years.

Education

Universal Transitional Kindergarten Proposed in May Revision

Transitional kindergarten is the first year of a two-year kindergarten program for children who turn five on or between September 2 and December 2 of the year they enter the program. Eligibility is based on age alone in public schools and is not dependent on family income. The governor’s revised budget proposes to implement a universal transitional kindergarten for all 4-year-olds in the state over a four-year period beginning with a planning period during the 2021-22 school year and ending with full implementation in 2024-25 school year.

The May Revision includes $250 million one-time Prop. 98 General Fund for planning and implementation grants for local education agencies in 2021-22, in lieu of the January budget proposal’s incentive grants. The May Revision also includes $10 million General Fund for the Department of Education to update the state’s preschool learning standards based on the most current research and to provide resources to pre-kindergarten teachers. Despite large gains in Prop. 98 funding, the Prop. 98 guarantee would be “rebenched” to cover the costs of the additional school year, shifting General Fund dollars into the Prop. 98 guarantee. The administration estimates that the cost to serve additional 4-year-olds in 2022-23 would be $900 million General Fund, expanding to $2.7 billion General Fund by 2024-25. The May Revision also includes funding in 2022-23 through 2024-25 to add another staff person in transitional kindergarten classrooms in an effort to provide more staff per child in each classroom. The administration estimates this additional staffing would cost $740 million Prop. 98 once the transitional kindergarten expansion is fully implemented in 2024-25.

While the May Revision would maintain funding for the California State Preschool Program – a program serving children from families with low and moderate incomes and operated by community-based organizations and local education agencies – it does not reinvest the significant amount of funding that was rescinded as a result of the pandemic. The administration does express an intent to develop a plan to transition the state preschool program to serve children younger than 4 years old in California.

Increased Revenues Significantly Boost the Minimum Funding Level for Schools and Community Colleges

Approved 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 2020-21 and 2021-22 revenues are significantly higher than those estimated in January’s budget proposal. As a result, the May Revision assumes a 2021-22 Prop. 98 funding level of $93.7 billion, $7.9 billion above the level assumed in the governor’s proposed budget, and a 2020-21 Prop. 98 funding level of $92.8 billion, $10 billion above the level assumed in January. The revised budget assumes a 2019-20 Prop. 98 funding level of $79.3 billion, slightly lower than the $79.5 billion funding level assumed by the governor in January. Revenue projections in the governor’s January budget proposal would have required deposits into the Public School System Stabilization Account (PSSSA) — the state budget reserve for K-12 schools and community colleges. The proposed budget assumed PSSSA deposits of $747 million in 2020-21 and $2.2 billion in 2021-22, which would have brought the PSSSA total to $3 billion. The revised budget’s increase in revenue projections require additional deposits to the PSSSA, which would bring the total PSSSA account balance to $4.6 billion in 2021-22. See the state reserves section.

May Revision revenue estimates exceed the state’s constitutional spending limit in 2020-21 and 2021-22, which would require a one-time payment to K-14 education that would supplement Prop. 98 funding and would be allocated to schools and community colleges based on K-12 average daily attendance and full-time equivalent community college students. The governor anticipates this payment will be provided in 2022-23 and total approximately $8.1 billion. See the state spending limit section.

To address the 2020-21 budget agreement’s reduction in Prop. 98 funding for K-12 schools and community colleges, last year’s budget package included a provision to supplement Prop. 98 funding beginning in 2021-22 by 1.5% of annual General Fund revenues. This new spending obligation was slated to continue until the total in supplemental payments reached $12.4 billion. Because of the significant increase in General Fund revenue projected in the governor’s proposed budget, the January spending plan proposed to eliminate the ongoing obligation, but included a one-time supplemental payment of $2.3 billion to K-14 education in 2021-22. The May Revision proposes to eliminate this one-time payment.

May Revision Dramatically Increases Funding for Several K-12 Education Programs and Boosts the LCFF Concentration Grant to 65%

The largest share of Prop. 98 spending goes to California’s school districts, charter schools, and county offices of education (COEs), which provide instruction to more than 6 million students in grades kindergarten through 12. The governor’s revised budget significantly increases K-12 spending above the level proposed in January, allocating funding to support a dramatic expansion of community schools, the return of schools to full-time, in-person instruction in 2021-22, and a boost in the state’s main grant for school districts and charter schools with large shares of disadvantaged students. Specifically, the governor’s May Revision:

Increases one-time funding for a total of $3 billion for community schools. Community schools provide integrated educational, health, and mental health services to students. The May Revision provides more than 10 times the $265 million proposed in the governor’s January budget for community school grants for school districts, COEs, and classroom-based charter schools to develop new and expand existing networks of community schools.
Proposes $2 billion in one-time funding for health and safety activities. The May Revision assumes a return to full-time, in-person instruction for the 2021-22 school year and would allocate this funding for any purpose that supports health and safety such as COVID-19 testing and vaccine initiatives, enhanced cleaning, improved ventilation, and salaries for in-person instruction including those for nurses and custodial staff.
Increases one-time funding for the Educator Effectiveness Block Grant for a total of $1.5 billion. The governor’s revised budget dramatically increases the $250 million proposed in the January budget and allows use of the dollars through 2023-24. The May Revision allocates this funding to school districts, COEs, and charter schools in an equal amount per their full-time equivalent certificated and classified staff for training resources in certain high-need topics such as accelerated learning and implicit bias training.
Increases Local Control Funding Formula (LCFF) by $1.2 billion. The LCFF provides school districts, charter schools, and COEs a base grant per student adjusted to reflect the number of students at various grade levels in these local educational agencies (LEAs). The governor’s May Revision would increase the cost-of-living adjustment (COLA) for the 2021-22 LCFF base grant from 3.84%, as proposed in the governor’s January budget, to 5.07%. The LCFF COLA proposed in the May Revision includes $520 million to provide a 1% discretionary increase to LCFF base funding.
Provides $1.1 billion in ongoing funding to increase LCFF concentration grants to 65% of the base grant. The LCFF also provides additional grants for the costs of educating English learners, students from low-income families, and foster youth, including so-called “concentration grants” for LEAs in which these students comprise more than 55% of total enrollment. The May Revision would increase concentration grants from 50% to 65% of the base grant in 2021-22 and states that LEAs that receive this additional concentration grant funding will be required to demonstrate how the dollars are being used to increase the number of certificated and/or classified staff on their campuses. The revised spending plan also includes $30 million in one-time funding for COEs to work with local partners to provide direct services to foster youth.
Provides an additional $1.1 billion to repay deferred payments to K-12 school districts. The 2020-21 budget agreement deferred $11.0 billion in payments for K-12 school districts until 2021-22. The payment deferrals allowed the state to authorize a level of spending by K-12 schools that the state could not afford in 2020-21, providing the state with one year of savings without requiring a reduction in K-12 education spending. The governor’s January budget proposed repaying $7.3 billion of the deferrals in 2021-22. The May Revision would increase the amount of this repayment to $8.4 billion, but would continue to defer $2.6 billion in payments until 2022-23.
Increases one-time funding by $950 million to improve the teacher pipeline over five years. The May Revision boosts the $225 million proposed in the January budget for several programs including:
- $450 million in Prop. 98 dollars for the Teacher Residency Program, a competitive grant program established in 2018 to recruit and prepare special education, science, technology, engineering, mathematics, and bilingual education teachers to teach in high-need communities. The revised budget states that these dollars could also be used to support “other grow-your-own teacher credentialing programs”;
- $400 million in non-Prop. 98 General Fund dollars for the Golden State Teacher Grant Program, a grant program for students enrolled in teacher preparation programs who commit to teach in “high-need” subjects, including bilingual education, STEM, and special education; and
- $100 million in Prop. 98 dollars for the California Classified School Employee Teacher Credential Program, which provides grants to K-12 school districts to recruit school employees to become classroom teachers.
Proposes $623 million in one-time funding for a Targeted Intervention grant. In addition to this proposed General Fund allocation, the May Revision would allocate $2 billion in federal funding, including $1.2 billion from the American Rescue Plan, for schools to provide interventions such as intensive tutoring to mitigate COVID-19 related impacts to K-12 education.
Proposes $250 million to attract and retain highly-qualified teachers as mentors. The revised budget proposes to use this one-time funding over five years to incentivize National Board Certified teachers that teach in high-poverty schools to serve as mentors for other instructional staff.
Proposes $250 million to support school meal programs. The revised budget includes $150 million in ongoing funding to encourage LEAs to participate in one of the federal universal meal programs that reduces the administrative burden associated with collecting school meal applications for schools that serve breakfast and lunch at no charge to all students. The May Revision also proposes $100 million in one-time funding to provide upgrades to school kitchens and training for cafeteria staff.
Provides $120.1 million to increase COLAs for special education and non-LCFF programs. The May Revision provides $117.7 million to increase the COLA for state special education funding from 1.5% to 4.05% and $2.4 million to increase the COLA for several categorical programs that remain outside of the LCFF to 1.7% from the 1.5% provided in January.

The May Revision includes a five-year plan for expanded instruction and enrichment for elementary school students in LEAs with the highest concentrations of low-income students, English learners, and foster youth. The Administration estimates that the cost to implement this proposal would be approximately $1 billion in 2021-22, growing to $5 billion in 2025-26. The May Revision suggests that the cost of the program would be incorporated into the LCFF concentration grant calculation once it is fully implemented.

The Revised Budget Expands Investments to Support the California Community Colleges

A portion of Proposition 98 funding provides support for California’s Community Colleges (CCCs), the largest postsecondary education system in the country. CCCs help prepare nearly 2.1 million students to transfer to four-year institutions or to obtain training and employment skills.

The 2021-22 revised budget proposes to fully pay down deferred state payments that were enacted in the 2020-21 budget, establishes basic needs centers at CCCs, and includes an investment in retention and enrollment efforts to address enrollment drops as a result of the pandemic. Specifically, the revised spending plan:

Includes approximately $327 million in one-time funds to pay down deferrals. The revised budget includes pay down of deferred payments to CCCs from 2021-22 to 2022-23.
Maintains the January proposal to provide $150 million one-time for emergency financial assistance to students. These funds are in addition to the $100 million that was included in the early action budget package to support students with financial need as a result of the pandemic. These dollars are intended to support students with emergency financial needs, including loss of employment.
Provides $185 million ongoing funding for a cost-of-living adjustment (COLA) for apportionments. The proposal represents a compounded 4.05% COLA that includes a 2020-21 COLA of 2.31% and a revised 2021-22 COLA of 1.7%.
Provides $115 million one-time funding to reduce the cost of instructional materials. This investment would support the development and implementation of zero-textbook-cost degrees and open educational resources.
Provides $100 million in one-time funds to support student retention and enrollment efforts. These funds are in addition to $20 million included in the state leaders’ early actions to support colleges that have been particularly affected by enrollment declines as a result of the pandemic.
Allocates $75 million one-time funding to expand dual enrollment. The investment would expand the College and Career Access Pathways dual enrollment model, which allows cohorts of high school students to take college-level courses on a high school campus.
Provides $52.4 million to support workforce development initiatives at CCCs. The administration includes an increase of $20 million one-time funds for CCCs to train and bridge students into quality jobs in collaboration with the California Workforce Development Board; $12.4 million ongoing to increase funding for the CCC’s Strong Workforce Program; $10 million one-time to increase funding for other work-based learning programs; and $10 million one-time to plan and implement competency-based education.
Allocates $50 million one-time funds for in-person instruction. The funds would provide grants to colleges for pandemic response efforts and a return to in-person instruction.
Provides an increase of $50 million ongoing funds to expand vocational training and English as a Second Language programs. The proposal expects that the programs will also enable students to enroll in certificate, credential, and degree programs.
Includes $30 million ongoing funds to establish basic needs centers. The centers would support CCCs students with their basic needs such as housing and food.

Other non-Proposition 98 investments include $4 billion one-time General Fund over two years to create additional student housing through grants to the University of California, California State University, and CCCs systems (see Housing section). In addition to housing, the revised spending plan includes $250 million in one-time General Fund for workforce development to be allocated to the Office of Planning and Research to provide grants for regional K-16 collaboratives (see Workforce Development section). Lastly, the administration includes $1 billion in one-time ARP dollars to support education and training for displaced workers via the Student Aid Commission (see Student Financial Aid section).

The May Revision Increases Funding for the California State University and University of California, Including Support for New Initiatives

California 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 roughly 486,000 students on 23 campuses, and the UC provides undergraduate, graduate, and professional education to about 285,000 students on 10 campuses.

For the CSU, the revised spending plan proposes $373.4 million additional General Fund, including:

$74.4 million ongoing General Fund to support operational costs which, in addition to the $111.5 million proposed in January, constitutes a five percent increase in base resources.
$299 million General Fund to address reductions outlined in the 2020-21 enacted budget.

The governor also proposes one-time spending of $150 million in federal ARP funds to address deferred maintenance and energy efficiency and $25 million General Fund for construction of the CSU Northridge Center for Equity in Innovation and Technology.

For the UC, the Administration proposes $371.7 million additional General Fund, including:

$69.3 million ongoing General Fund to support operational costs which, in addition to the $103.9 million proposed in January, constitutes a five percent increase in base resources.
$302.4 million General Fund to address reductions outlined in the 2020-21 enacted budget.

In addition, the governor also proposes one-time spending of $150 million federal ARP funds to address deferred maintenance for UC campuses and $76.2 million General Fund to support animal shelters, dyslexia research, hate crime prevention for Asian Pacific Islander communities and other purposes.

Furthermore, to transition Humboldt State University into the state’s third polytechnic university, the May Revision provides $433 million one-time General Fund for a capital projects transition plan and $25 million ongoing General Fund for additional academic programs.

Lastly, the revised spending plan provides significant one-time funding across the CSU, the UC, and the California Community Colleges, including:

$4 billion General Fund for a low-cost student housing grant program to build new housing and convert commercial properties into housing, split between the 2021-22 and 2022-23 state fiscal years. The program would prioritize students who are under-represented or have low incomes, with the aim of reducing non-tuition attendance costs.
$1 billion General Fund to create an endowment to support career development, split between the 2021-22 and 2022-23 fiscal years.
$1 billion ARP funds for grants to support workers displaced by the COVID-19 recession in pursuit of postsecondary education, training, or starting a business. (See Student Financial Aid section).
$250 million General Fund to support regional K-16 collaboratives focused on pathways to employment and workforce needs.

Governor Proposes new Grant for Student Housing and Expands Funding for Golden State Teacher Grant Program

Cal Grants are the foundation of California’s financial aid program for low- and middle-income students pursuing higher education in the state. Cal Grants provide aid for tuition and living expenses that do not have to be paid back. Ensuring Californians have access and the resources to attend and thrive across the state’s higher education institutions broadens opportunities for individuals and families, as well as strengthens our state’s workforce to drive long-term economic growth. The May Revision maintains provisions in the January proposal to increase Cal Grant awards to students, including expansions to the Foster Youth Access Awards and Access Awards for Students with Dependent Children and funding to increase the number of Annual Competitive Cal Grants from 41,000 to 50,000.

Many students confront significant hardships to afford tuition and living expenses, including student-parents, current and former foster youth, undocumented students, and those from families with low incomes. To address the need for more affordable student housing, the governor’s revised spending plan includes $4 billion one-time General Fund to be allocated evenly between 2021-22 and 2022-23 fiscal years to establish a housing grant program. The California School Finance Authority would administer grants to the University of California, California State University, and California Community Colleges to build new housing or to acquire properties that could be renovated into student housing. Students with low incomes and under-represented students would receive priority access to new units.

The May Revision also allocates $1 billion one-time ARP funds to create a grant program for Californians displaced from their employment due to COVID-19. The California Student Aid Commission (CSAC) would establish a one-time grant program for workers to cover costs of educational and training programs or to start a business. The grant amounts would be determined by CSAC and at least half of the funds would be dedicated to workers with dependent children.

Finally, the governor’s proposal increases funding for the Golden State Teacher Grant Program by $400 million one-time General Fund. The administration’s proposal now totals $500 million to be allocated over the next 5 years. No more than $100 million could be spent each year to provide up to 5,000 grants of $20,000 for teachers committed to teaching for four years in “high-need” subjects, including bilingual education, STEM, and special education, in schools that have a high percentage of teachers with “emergency-type permits.”

Revised Budget Includes Investment to Increase Access to College Through Savings Accounts

A child savings account is a long-term savings account established for children as early as birth that builds assets over time. These accounts are generally seeded with an initial deposit from a government agency or another sponsoring organization, then built with contributions from family, friends, or the child. Once the child reaches adulthood, the savings are typically used for college and can help make higher education more affordable and accessible. In the 2019-20 budget, the governor provided funding to create a program in the State Treasury called the California Kids Investment and Development Savings Program for children from families with low incomes born after July 2020.

The 2021-22 revised spending plan includes approximately $2 billion one-time ARP funds to establish a new program, the California Child Savings Accounts Program. This program would create college savings accounts for first graders enrolled in public school and defined as “low-income” by the Local Control Funding Formula. The governor proposes providing $500 in seed funding for each student, with youth involved in the foster care system or who experience homelessness receiving an additional $500 deposit. The revised spending plan reflects the governor’s desire to continue to invest $170 million ongoing General Fund in accounts for future first graders, beginning in 2022-23. However, the revised spending plan does not expressly allocate the funding for these future investments.

The Revised Spending Plan Proposes a $7 Billion Dollar Investment to Address the Digital Divide in Learning

The 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 accessing many other services. While efforts to narrow the divide have made some progress in access to devices for K-12 students, reliable access to the internet remains a major barrier, especially for households with low incomes.

The governor’s revised spending plan proposes $7 billion in ARP and state funds over three years to expand broadband access. The proposal is intended to expand statewide infrastructure necessary to reach unserved areas of the state, provide assistance to expand local networks through a new $500 million “Loan Loss Reserve Account,” and expand services in rural communities by providing $500 million in one-time ARP dollars to “entities” to “promote” access to broadband in rural areas.

While broadband infrastructure is necessary to reach many households, especially in rural areas of the state, the proposal does not specify how the investment will address affordability and other adoption barriers for Californians who do have broadband available. Other barriers to adoption, including lack of affordable services from internet providers, disproportionately bar low-income and Latinx Californians from access to high-speed internet even when it is available.

Governor’s Workforce Development Proposals Include Higher Education Partnerships, Displaced Worker Support, and Regional Recovery Planning

As of March 2021, California was still down more jobs than the state lost during the Great Recession, with job losses concentrated among workers with low wages and Black and Latinx workers hit hardest. If the recent pace of job recovery continues, it would take more than 18 months to close the job shortfall, and some jobs in some industries may never come back. To help workers struggling to secure jobs or shift industries as the economic recovery continues, the governor’s revised budget includes a number of proposals focused on workforce development.

Several of these proposals leverage the state’s public higher education institutions to provide worker education and training and create pipelines to jobs, including:

$1 billion General Fund to create an endowment to support “learning-aligned employment” through the University of California, California State University, and California Community Colleges (CCC) (see UC/CSU section).
$157 million one-time General Fund for new cooperative efforts between workforce programs and the CCC, as well as $52.4 million largely one-time funds to the CCC to implement and support workforce development initiatives (see California Community Colleges section).
$250 million one-time General Fund for K-16 regional collaboratives to support linkages between education and employment (see California Community Colleges section).

Additional workforce development proposals include:

$1 billion ARP funds to support education and training for displaced workers (see Student Financial Aid section).
$750 million one-time ARP funds for a Community Economic Resilience Fund to support regional and local planning and implementation of strategies to adapt to a changing economy, with a focus on high road industries, quality jobs, and sectors or regions most affected by the state’s transition to carbon neutrality.
$185 million to support various industry-based training strategies through the Workforce Board and Employment Training Panel (an increase of $160 million over the January proposal).
$200 million ARP funds for grants to cities and counties, administered by California Volunteers, to create or expand youth employment opportunities.

Justice System

May Revision Does Not Propose to Close Additional State Prisons in the Coming Years

Nearly 96,500 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. More than two-thirds of state prisoners are Black or Latinx individuals — 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 — 91,881 — are housed in state prisons designed to hold fewer than 85,100 people. This level of overcrowding is equal to 108% 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 over 4,600 people in facilities that are not subject to the court-ordered 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 reforms to the justice system enacted during the 2010s 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 May Revision:

Does not propose to close additional state prisons in the coming years. California owns and operates 34 state prisons. Two state prisons are scheduled to be shut down over the next 13 months: one in Tracy, in September 2021, and the other in Susanville, in June 2022. These closures are projected to result in state General Fund savings of around $270 million per year beginning in 2022-23. The May Revision does not propose to close additional state prisons even though the Legislative Analyst’s Office (LAO) has estimated California likely can close up to five prisons over the next few years — three more than are currently scheduled to be shut down.
Proposes $212.3 million General Fund, to be spent over three years, to install “fixed security” cameras at 24 state prisons. This technology will “transform surveillance across the prison system” and increase the state’s capacity to operate safe prisons, according to the May Revision. Fixed security cameras are being installed at several additional state prisons using other funds.This proposal also assumes ongoing state costs of $11 million per year.
Reports that only 4 out of 10 prison system employees have been fully vaccinated against COVID-19. Only 40% of prison system system staff (about 26,000) had received “complete courses” of the COVID-19 vaccine by April 30. In contrast, nearly two-thirds of incarcerated adults (around 62,000) had been fully vaccinated by that date. The state began distributing vaccines in December 2020.
Projects the state is on track to spend nearly $1.2 billion on COVID-19 activities in state prisons from the onset of the pandemic to the end of the current fiscal year (June 30, 2021). Moreover, the governor proposes to spend an additional $407.9 million on COVID-19 activities in prison during the upcoming 2021-22 fiscal year
Allocates $93 million General Fund in 2020-21 and 2021-22 combined and $36.8 million ongoing to support efforts to address staff misconduct and discrimination. This funding will allow the California Department of Corrections and Rehabilitation to implement a wide array of reforms, which largely come in response to a recent federal court decision.
Proposes to expand rehabilitative programming and make facility improvements at Valley State Prison, using Norway’s correctional model as a guide. This proposal includes several components, including installing modular buildings to accommodate additional educational and rehabilitative activities and adding vocational and career technical training opportunities. The governor proposes to spend $13.7 million General Fund in 2021-22 and $3 million ongoing to implement this plan.
Includes $3.1 million ongoing General Fund to help reduce a backlog of parole hearings as well as address the rising number of hearings. These funds would allow the state to boost the number of Board of Parole Hearings (BPH) commissioners from 17 to 21. The growing number of BPH hearings and the backlog are due to several factors, including court decisions, recent legislation making more incarcerated adults eligible for parole, and the high number of hearing postponements in 2020.

May Revision Expands Fines and Fees Alleviation for Californians With Low Incomes and Extends Funds for Select Judicial Programs

California’s 58 county-based trial courts are fundamental to the state’s Judicial Branch and justice system. County trial courts are the starting point for the majority of legal cases and process civil, criminal, family, probate, mental health, juvenile, and traffic cases. The revised budget acknowledges the financial strain that fines and fees place on Californians with low incomes. Specifically, the May Revision:

Allocates $300 million one-time federal ARP funds to establish a debt forgiveness program to eliminate debt on existing fines and fees for traffic and non-traffic infraction tickets issued between January 1, 2015 and June 30, 2021 for Californians with low incomes. Qualifying applicants can have 100% of their debt forgiven. These funds also cover implementation costs and compensation for the loss revenue for courts and local governments.
Maintains $12.3 million General Fund in 2021-22, increasing to $58.4 million ongoing General Fund by 2024-25 for the online ability-to-pay pilot program. These proposed funds are allocated to expand a pilot program statewide to allow Californians with qualifying incomes to reduce their penalties by 50% or more and make payments over time for certain traffic and non-traffic related fines and fees.

The administration also recognizes that the Judicial Branch had to make drastic changes, and even experienced periods of courthouse closures, due to the COVID-19 pandemic. To begin addressing case backlogs and expand evidence-based judicial services, the May Revision:

Restores $176.9 million for trial courts and $23.1 million for the state-level judiciary. These funds are intended for courts to re-open and process case backlogs exacerbated by COVID-19 safety closures.
Extends $140 million General Fund in 2021-22 and $70 million ongoing for the pretrial pilot program administered by the Judicial Council. These funds primarily target judicial education and technical assistance to increase safe and efficient pretrial releases, assist in ensuring court appearances, and ensure appropriate monitoring practices for those released.
Proposes $20 million ($60 million total) ARP funds annually for three years to support legal aid services for renters and homeowners for eviction and foreclosure prevention. (See also Housing)

Other Proposals

Governor Proposes Increased Investment in Water Infrastructure and Drought Response

All Californians are affected by the availability of clean and safe drinking water, decisions related to water management, and climate change, which makes the state more prone to severe droughts. The governor recently issued a drought emergency proclamation for 41 counties, representing 30% of the state’s population. The May Revision builds on the $757 million proposed in January to improve the state’s water infrastructure, drought response, and capacity to adapt to and recover from changed conditions. Specifically, the revised budget includes $4.35 billion to be spent over four years. This reflects $2.8 billion General Fund, $1.5 billion in ARP funds, and $10.5 million bond and special funds. About $3.5 billion would be spent in 2021-22. Some of the proposals included in this package are as follows:

$1.47 billion ($85 million General Fund and $1.39 billion federal funds) over two years for drinking water and wastewater infrastructure, with a focus on communities that have been historically disadvantaged. Funding will also be used for groundwater supply projects and planning, cleanup of contaminated groundwater, water recycling projects, and treatment systems on drinking water wells.
$989 million ($949 million General Fund, $30 million federal funds, and $10 million bond and special funds) to meet the state’s water supply needs and build the capacity to endure dry conditions.
$726 million General Fund to improve ecological conditions and help species cope with climate change.
$440 million General Fund over two years to better manage energy consumption tied to water management.
$371 million General Fund over two years to facilitate groundwater recharge, a critical water management practice. This funding will also be used to support flood risk reduction projects as well as advance studies with the goal of providing local water managers better data for local decision-making.

The May Revision also proposes $1 billion in ARP funds for direct payments to water systems to cover overdue payments on water bills accumulated by households during the pandemic. (See also Housing section.)

The Budget Center’s First Look: Analysis of 2021-22 May Revision

Executive Summary

Contents

Budget Overview

Health

Homelessness & Housing

Economic Security

Education

Justice System

Other Proposals

Budget Overview

Governor’s Economic Outlook Has Improved but a Recovery Remains a Long Way Off

Revised Budget Reflects Significantly Higher Revenues Than Previously Projected

Governor’s Revised Budget Assumes the State Will Exceed Its Constitutional Spending Limit

Stronger-Than-Expected Revenues Allow State to Build Reserves to $24 Billion

May Revision Continues to Pay Down Unfunded Liabilities

Governor Proposes Expansions of Grants, Tax Credits, and Other Assistance for Businesses

Health

The May Revision Misses Key Opportunity to Invest in Local Public Health Departments

May Revision Expands Comprehensive Medi-Cal Coverage to Older Adults Who Are Undocumented

Revised Budget Builds on Efforts to Improve Health Outcomes Through Medi-Cal Reform

Governor’s May Revision Provides Support for Californians’ Mental Health and Substance Use Disorder Needs

Homelessness & Housing

Governor Proposes $12 Billion to Address Homelessness by Acquiring Housing and Meeting Needs of Specific Populations

Governor Proposes Using Federal Funds to Help Struggling Renters and Develop Affordable Housing

Economic Security

Governor Proposes Second Golden State Stimulus for Californians with Low and Moderate Incomes

Governor Proposes Investing in Basic Income Pilots

Governor Proposes Extending Some Benefits to Immigrants Who Are Undocumented, Misses Opportunity to Fill Gaps in Federal Aid

The Administration’s Revised Proposal Makes Some Adjustments to the CalWORKs Program, Anticipates Slow Caseload Growth

May Revision Expands Investment in K-12 School Nutrition, Misses Opportunity to Expand Food Assistance to All Californians Regardless of Immigration Status

May Revision Provides Partial Plan for Federal Child Care Relief Funds, Including 100,000 New Spaces for Children

May Revision Fails to Maintain Payment Rates for California Workers Who Need Paid Time Off

Governor Proposes State Increase for SSI/SSP Grants, Makes Additional Investments in Services for Older Adults and People with Disabilities

Education

Universal Transitional Kindergarten Proposed in May Revision

Increased Revenues Significantly Boost the Minimum Funding Level for Schools and Community Colleges

May Revision Dramatically Increases Funding for Several K-12 Education Programs and Boosts the LCFF Concentration Grant to 65%

The Revised Budget Expands Investments to Support the California Community Colleges

The May Revision Increases Funding for the California State University and University of California, Including Support for New Initiatives

Governor Proposes new Grant for Student Housing and Expands Funding for Golden State Teacher Grant Program

Revised Budget Includes Investment to Increase Access to College Through Savings Accounts

The Revised Spending Plan Proposes a $7 Billion Dollar Investment to Address the Digital Divide in Learning

Governor’s Workforce Development Proposals Include Higher Education Partnerships, Displaced Worker Support, and Regional Recovery Planning

Justice System

May Revision Does Not Propose to Close Additional State Prisons in the Coming Years

May Revision Expands Fines and Fees Alleviation for Californians With Low Incomes and Extends Funds for Select Judicial Programs

Other Proposals

Governor Proposes Increased Investment in Water Infrastructure and Drought Response

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