News from the Capitol

January 10, 2024

TO:                 CLA MEMBERS/ SYSTEMS/ NETWORK CONTACTS
FROM:           Christina DiCaro, CLA Lobbyis
RE:                 News From the Capitol

GOVERNOR NEWSOM RELEASES 2024-25 STATE BUDGET

Proposes Large Cuts to Library Infrastructure and Library Broadband Grants

This morning Governor Gavin Newsom unveiled his much-anticipated 2024-25 January Budget in front of the press corps in Sacramento. Unfortunately, the Governor’s plan contains significant proposed cuts to numerous state programs, including the library infrastructure grant program and the library broadband grant program under the State Library’s jurisdiction. 

Capitol watchers have been anxiously waiting to see how the Governor would tackle a reported $68 billion budget deficit, a daunting dollar amount which had been flagged several weeks ago by the state’s non-partisan Legislative Analyst’s Office (LAO).  In his remarks this morning, the Governor scored the Budget deficit at $37.86 billion, which would appear to be better fiscal news for the Golden State, but still a challenging deficit to close.  The Governor said that the difference in the numbers between his Department of Finance and the LAO are largely a result of the delayed state tax receipts - due to the waivers provided for residents in declared disaster areas after the California January 2023 storms.  The Governor noted that “all of this uncertainty happened because we experienced something we’ve never experienced in modern history of the state.  We didn’t collect taxes in April of last year.”  The Governor added that the state’s typical process is that the Governor releases his Budget in January and then has the opportunity to revise his Budget in May (in a document known as the “May Revision”) once April tax receipts are received and additional financial factors are taken into account.  The Governor’s Budget document states, “With reliable tax filing deadlines, the degree of revenue drop associated with the 2022 market declines would have become evident as tax receipts were received in the spring” of 2023, which did not occur.  He likened the predictions associated with the 2023-24 budgeting to working on future estimates while “blindfolded.” 

With regard to the reductions to the State Library programs, the Governor’s Proposed Budget reads:

• Support for Local Library Infrastructure – “The Budget proposes to pull back $131.3 million one-time General Fund of the $439 million in one-time General Fund support provided for the Local Library Infrastructure Grant Program in the 2021 Budget Act, and proposes to forgo planned one-time General Fund investments of $33 million in 2024-25, $33 million in 2025-26, and $34 million in 2026-27.”
  
  

As CLA members will recall, thanks to the advocacy of CLA and the support and assistance of the Senate President pro Tem Toni Atkins, then-Assembly Speaker Anthony Rendon, Governor Newsom, and State Librarian Greg Lucas, the 2021-22 State Budget included an unprecedented $439 million in library construction grant funding for public library projects.  The 2022-23 Budget also contained $50 million in additional funding for library construction grants.  The grants were used for various  library health and safety construction projects, renovations, or expansions at public libraries. Interest in the program has been substantial, with applications to the State Library program far exceeding the dollars appropriated by the state.  In fact, several months ago, CLA sent a letter to Governor Newsom, encouraging him to include up to another $300 million for more infrastructure library grants in his new Budget if state revenues had stabilized.  As CLA members are aware, the Governor and First Partner have been strong supporters of public libraries and library initiatives, so this proposed cut seems to speak to the severe budget challenges facing the Governor and Legislature. 

Additionally, the Budget reads:

Statewide Library Broadband Services:  “To address the projected budget shortfall, the Budget proposes to pull-back $34 million of the $35 million provided to expand broadband access to isolated and under-served communities through a collaborative partnership of local education agencies, and regional libraries due to low participation in the program.” (emphasis added)

Here are some of the other key components from the Governor’s January Budget:

• There is a total of $8.5 billion in reductions (cuts) from various program areas such as:
  • $2.9 billion in Various Climate Reductions
  • $1.2 billion in Various Housing Program Reductions
  • $762.5 million in State Vacant Position Funding Sweeps
  • $350 million in previously approved legislative requests
  • $289 million for the Middle Class Scholarship Program

   

• $5.1 billion in delays to various programs “and spreads it across the three-year period, beginning 2025-26” such as:
  • $1 billion for the Transit and Intercity Rail Capitol Program
  • $613 million for the full implementation of the DDS Service Provider Rate Reform
  • $550 million for the Preschool, Transitional Kindergarten and Full-Day Kindergarten Facilities Grant Program
  • $400 million for the Clean Energy Reliability Investment Plan
• $3.4 billion in Fund Shifts – moving the dollars from the General Fund to other fund sources such as:
• $1.8 billion for the Greenhouse Gas Reduction Fund
• $1.3 billion for retirement contribution reductions (shift to the Prop 2 account)

A unique element of the Governor’s Budget, as referenced above in the “reductions” category is the deferral of “all new, discretionary spending decisions to this spring, for discussion with the Legislature, based on actual revenues.  Therefore, the balanced plan reflected in the Budget defers the consideration of resource requests associated with recently chaptered legislation (emphasis added) to the May Revision.  As part of the spring budget process, the Administration is committed to working closely with the Legislature to prioritize the budget related to recently chaptered legislation.”  This note seems to signal a potential clawing-back of some of the newly enacted 2023 legislation that may be poised for implementation, and affecting various state departments and agencies, until the state has a better understanding of spring revenues.

Finally, the Governor also proposes delaying the implementation of a much-publicized agreement reached last year with the legislature to raise the minimum wage of health care workers incrementally to $25 an hour, effective June 1, 2024.  “The Administration is seeking early action in January by the Legislature to add an annual ‘trigger’ to make the minimum wage increases subject to General Fund revenue availability, clarify the exemption for state facilities, and make other implementation clarifications.” 

The Assembly and Senate Budget Committees will hold an overview hearing of the Governor’s Budget at the end of the month and then the Committees will break into subject area Budget subcommittees, where they will review the Governor’s proposals in greater detail.  The state Budget must be passed by the two houses and sent to the Governor by the Constitutional deadline of June 15^th, or the legislature must forfeit pay.