The Legislation Committee receives regular updates on the State Budget and state legislative activity.
Referral Update:
Governor Calls for Special Session of Legislature to Consider Windfall Tax on Oil Companies
On October 7, 2022, media reports indicated that Governor Newsom would call a special session of the Legislature for December 5 to consider a "windfall tax" on oil companies. According to the Governor's press office:
"Crude oil prices are dropping, but oil and gas companies are still raising prices on California consumers. These price hikes cannot be attributed solely to refinery maintenance issues, hurricane disruptions, or even state taxes. Governor Newsom is working with the Legislature to enact a new windfall profits tax on oil companies. Companies engaged in extraction, production, and refining of oil will pay a higher tax rate on their earnings above a set amount each year, and these recouped windfall profits will then be directed to rebates/refunds to California taxpayers impacted by high gas prices."
Governor Calls for More Aggressive Action on Homelessness
On November 3, Governor Newsom announced that he will convene local leaders in mid-November to review the state’s collective approach to homelessness and identify new strategies to better address the growing homelessness crisis. Until this convening, the state will hold on providing the remaining third round of Homelessness Housing, Assistance and Prevention (HHAP) grants.
The third round of HHAP grants provides a share of $1 billion to every county, Continuum of Care, and the 13 largest cities in the state, on the condition that each local government has a plan approved by the state that reduces the number of unsheltered homeless individuals and increases permanent housing.
The state has so far provided over $1.5 billion of flexible emergency aid to address homelessness through the Homeless Emergency Aid Program and the first two rounds of HHAP funding. Now, recipients of the third round of HHAP funding have new requirements and must create a Homelessness Action Plan that addresses, in detail, local actions to prevent and reduce the number of individuals experiencing homelessness at the community level. The plans must include a landscape analysis that assesses the current number of people experiencing homelessness in a given community and identify all existing programs, and all sources of funding aimed at tackling this crisis. Additionally, the plans must include outcome-driven results and strategies for achieving these goals using clear metrics to track success.
The budget Governor Newsom signed earlier this year includes $700 million for encampment resolution grants with $350 million earmarked for assisting those living on state right-of-way property.
State Budget
The state Legislative Analyst's Office plans to release its analysis, The 2023-24 Budget: California's Fiscal Outlook on November 17, 2022.
Key takeaways from the analysis are listed below.
Economic Conditions Weigh on Revenues. The longer inflation persists and the higher the Federal Reserve increases interest rates in response, the greater the risk to the economy. Reflecting the threat of a recession, our revenue estimates represent the weakest performance the state has experienced since the Great Recession.
State Faces $25 Billion Budget Problem and Ongoing Deficits. Under our outlook, the Legislature would face a budget problem of $25 billion in 2023-24. The budget problem is mainly attributable to lower revenue estimates. Over the subsequent years of the forecast, annual deficits would decline from $17 billion to $8 billion.
Save Reserves for a Recession. The budget problem in 2023-24 is roughly equivalent to the amount of the state’s general-purpose reserves. While these revenue estimates incorporate the risk of a recession, they do not reflect a recession scenario. Based on historical experience, revenues in a recession could be $30 billion to $50 billion below our revenue outlook. As such, we suggest the Legislature begin planning the 2023-24 budget without using general purpose reserves.
Recommend Legislature Identify Recent Augmentations to Pause or Delay. In light of the magnitude of recent budget augmentations, we recommend the Legislature evaluate whether funding has been distributed and if programs are working as expected. In some cases, capacity issues may have constrained implementation or other challenges may have emerged. To address the budget problem for the upcoming year, these cases might provide the Legislature with areas for pause, delay, or reassessment.
Guidance Issued on General Uses of CARE Court Start-up Funding
The Department of Health Care Services (DHCS) has released guidance for ?the General Uses of the Community Assistance, Recovery, and Empowerment (CARE) Act Startup Funding via Behavioral Health Information Notice (BHIN) 22-059. This guidance closely follows the provisional language included in AB 179, which provided for broad uses of the $57 million in state funding to be allocated to counties to address CARE Court planning costs.
This guidance covers the allocations for both the $26 million for the initial cohort of seven counties and the $31 million for all counties to prepare for implementation. More detail on the allocations, which have now been distributed to counties, including the methodology used, may be found here. The guidance is as follows:
POLICY: Of the $57 million, $31 million is available for each county and the City and County of San Francisco to support planning and preparation activities, including, but not limited to, hiring, training, and development of policies and procedures, and to support information technology infrastructure costs, including, but not limited to, changes needed to electronic medical record systems, changes to collect needed reporting data, and case tracking and new billing processes to bill commercial plans, and excluding capital expenses.
Of the $57 million, $26 million is available to support Cohort I county planning and preparation to implement the CARE Act.
Recommendation(s)/Next Step(s):
ACCEPT the report on state budget and legislative matters and provide direction to staff and the County's state advocates, as needed.