Governor's Proposed 2021-22 State Budget
Governor Newsom released his $227 billion 2021-22 proposed State Budget on January 8, 2021, highlighting the dramatic differences from 2020 to today. The General Fund revenue forecast has improved dramatically since the enactment of the FY 2020-21 budget. According to the Department of Finance, the increase can generally be tied to three factors:
- a less severe economic downturn than anticipated in the 2020-21 budget,
- a significantly greater unequal spread of wage losses in the downturn between higher- and lower-wage workers, and
- a stronger stock market than was expected.
The Administration has identified $34 billion in “budget resiliency,” which is what the Governor is calling the state’s budgetary reserves and surplus. Of this amount, reserves include $15.6 billion in the state’s Proposition 2 Stabilization Account (the Rainy Day Fund) for fiscal emergencies; $450 million for the Safety Net Reserve; $3 billion in the Public School System Stabilization Account; and $2.9 billion in the state’s operating reserve.
The state’s improved revenue picture also allows the state to delay $2 billion in scheduled program suspensions for one year. These are previously scheduled suspensions in the 2020-21 budget that would have otherwise taken effect on July 1, 2021 or December 31, 2021. These include (but are not limited to) Proposition 56 supplemental payment increases, reversing the seven percent reduction in In-Home Supportive Services hours, certain Medi-Cal optional services, and developmental services payment increases.
The budget notes that in December, over 4 million Californians were still receiving some form of unemployment benefits and only about half the jobs lost during the pandemic have been recovered. The budget also estimates a structural budget deficit of $7.6 billion for 2022-23 that is forecast to grow to more than $11 billion by 2024-25. To that end, the budget indicates that additional federal stimulus is necessary to ensure a robust ongoing pandemic response and economic recovery. In particular, the Governor noted during his press conference the urgent need for the Biden Administration to focus on local government discretionary relief. Further, the budget does not include information associated with federal funds received in the December’s Coronavirus Response and Relief Supplemental Appropriations Act; beyond what is already outlined for early action, the May Revision will reflect these investments.
An analysis of the Governor's proposed 2021-22 state budget by the California State Association of Counties (CSAC) is available here.
On February 3, Governor Newsom announced on Twitter that California has an additional $10.3 billion in its coffers than estimated when the proposed budget was introduced.
Urban Counties of California (UCC) Recap of Assembly Joint Hearing on Homelessness
The Assembly Budget Subcommittee No. 4 on State Administration and the Assembly Housing and Community Development Committee held a joint information hearing on January 21 to explore the state’s role in the ongoing homelessness crisis. The agenda featured three panels of speakers including the Secretary of the Business, Consumer Services, and Housing Agency, local agency representatives, and experts from academia and nonprofits. The agenda includes background material that succinctly summarizes the one-time allocations the state has made to local jurisdictions in recent years. The Legislative Analyst’s Office handout also provides some additional context and details that were the focus of the hearing.
UCC's biggest takeaways from the hearing are that some members of the Assembly are still singularly focused on the ability of local governments, and in particular counties, to expeditiously and effectively invest state funds to mitigate and prevent homelessness and that a state database might soon help answer numerous data related questions about the efficacy of certain homelessness programs over others.
The Administration’s representatives responded to the local government inquires stating that nothing in the data suggest that counties, cities, or Continuums of Care (CoCs) are working with anything other than appropriate exigency to implement state programs to house our burgeoning homeless population. Moreover, a significant share of the funding was only made available to locals in the middle of 2020 and amid the COVID-19 pandemic. Finally, the state anticipates its new data system – the Homeless Data Integration System (HDIS) – to become operational in the spring. The database will allow the state to access and compile standardized data collected by CoCs and will provide more information about the delivery of homeless services in the state.
Future legislative hearings on homelessness issues are anticipated in the coming months, especially once new quarterly data is reported by locals and CoCs and the HDIS system is up and running.
HHS Budget Hearings
The Assembly and Senate budget subcommittees have released their schedules for discussing health and human services budget issues. The hearings are starting much earlier – in early February – and will conclude in mid-March. Both houses note that in an effort to prioritize limited time and hearing space, fewer issues will be discussed. We’re also hearing that very few member budget requests will be agendized and discussed.
The health hearings are as follows:
- Public health: Assembly, February 8; Senate, February 19
- CalAIM: Assembly, March 9 (behavioral health components) and March 16 (jointly with Assembly Health); Senate, February 12
- Behavioral Health: Assembly, February 22; Senate, February 12
- Office of Health Care Affordability: Senate, February 5
The human services hearings include:
- Aging issues: Assembly, February 2; Senate, March 2
- CalWORKs and CalFresh: Assembly, likely March 3; Senate, February 16
- Children’s issues: Senate, February 9
- Child Care: Senate, February 16
- Access to housing, eviction prevention and racial equity: Assembly, March 3
LAO Issuing Budget Analyses
As the budget subcommittee hearing picture becomes more clear, the Legislative Analyst’s Office has begun to release its assessment of various aspects of the Governor’s proposed 2021-22 spending plan. The office’s publications are posted as they are released on this page.
Eviction Protections Extended, Rental Assistance Program Gearing Up
The Legislature has approved and Governor Gavin Newsom has signed into law an extension of the state’s eviction moratorium and allocation of federal rental and utility assistance funds. The bills do the following:
SB 89: Budget Bill Jr.
SB 89 makes technical changes to the 2020-21 Budget Act to appropriate and implement federal funds received for rental assistance under the California Department of Housing and Community Development (HCD).
SB 91: Eviction Moratorium/Rental Assistance
SB 91 extends the existing statewide moratorium (established via last year’s AB 3088) on evictions through June 2021 and includes provisions to allocate up to $2.6 billion in federal stimulus funds for purposes of rental and utility assistance ($1.1 billion for cities and counties with populations of 200,000 or greater and $1.5 billion to the state for allocation and administration).
As a reminder, HCD is tasked with administering a program to allocate the state share of federal assistance, as follows:
- Funding for the first round is prioritized for those renters with incomes less than 50% area median income (AMI); funding for the second round is for communities disproportionately impacted by COVID-19; finally, funding for round 3 is dedicated for eligible households at 80% AMI or less.
- Funding may be used for rental arrears, prospective rent payments, utility arrears, and prospective utility payments.
- Payments may be made directly to landlords, with rental arrears limited to 80% of unpaid rental debt from April 1, 2020 through March 31, 2021; under an agreement between grantees and the landlord, the payment must be accepted as payment in full. If a landlord refuses to participate, payments may be made directly to renters up to 25% of unpaid debt.
- Funds are allocated based on population, with $150 million set aside for counties with populations under 200,000. Remaining funds will be allocated to those cities and counties with populations above 200,000. For cities and counties with populations greater than 500,000, amounts will be received as a block grant from the state. Cities and counties with populations between 200,000 and 500,000 are eligible to receive funding as a block grant. For localities with populations below 200,000 or those who have declined to receive their state block grant, the bill permits HCD to contract with a vendor to serve as the program implementer to manage and fund services to distribute emergency rental assistance resources. Up to 10 percent of funds may be used for administrative purposes.
- For those cities and counties with populations above 200,000, there are three options for administration: (1) state-administered: a jurisdiction authorizes the state to administer its federal and state shares; (2) self-administered: a jurisdiction requests the state block grant and administers that with the federal allocation in accordance with state and federal guidelines; (3) self-administered and state-administered: a jurisdiction chooses to administer its program in a different manner than that prescribed by the state, it is not eligible for a state block grant. The state will administer its program with those funds within that jurisdiction.
- Initial allocation of funds must be completed and shared no later than February 19, 2021 by HCD, in consultation with the Department of Finance. Locals must request the block grants by February 12, 2021, must contractually obligate at least 65 percent of those funds by June 1, 2021, and must fully expend those funds by August 1, 2021.
- HCD is also directed to establish a contract with an education and outreach contractor to conduct a multilingual statewide campaign to promote program participation and accessibility.
Other legislation of interest to the County is included in Attachment A.
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