Top priorities for cities get new investments in Gov. Gavin Newsom’s proposed state budget

$286 billion including new spending to address COVID-19, climate change, homelessness, and public safety

Gov. Gavin Newsom unveiled his proposed 2022-23 State Budget, building on the state’s efforts to address the COVID-19 pandemic, homelessness, wildfires, and drought. In total, the Governor’s plan lays out billions in new spending on what he calls California’s biggest challenges including: COVID-19, climate change, homelessness, the cost of living, and keeping our streets safe.

California’s economy grew substantially in the past year, despite the ongoing pandemic, resulting in a projected $45.7 billion surplus. The Governor proposed to put the state’s wealth to work in a $286.4 billion budget that rebuilds reserves and strengthens economic support for businesses and families. A vast majority of the surplus allocation is expected to be one-time investments. Of note, many of the Governor’s investments of interest for cities are expansions of existing programs, a notable shift from previous budgets. Cities should be in a position to protect existing local revenues and remain eligible for billions in resources found in the Governor’s budget. 

Given historic revenue growth, it is anticipated that the state appropriation limit (“Gann” limit) will be exceeded. State revenues in excess of this limit must be spent on taxpayer rebates and increased funding for education. The proposed budget does not include any proposals to expend the excess revenue and postpones addressing the issue until the May Revision. Cities can expect maneuvering throughout the budget-building process to bring state spending below the constitutional limit, which can include actions to pay down additional debt, invest in infrastructure, and provide discretionary funding to local governments.  

Overall, the Governor’s budget is well-positioned to support local government efforts to protect residents, address public health impacts of COVID-19, and stabilize local economies.  

Read Cal Cities Executive Director and CEO Carolyn Coleman’s statement in response to the budget proposal, and Cal Cities’ analysis of the budget below.

Housing, Community, and Economic Development

The Governor's proposed budget contains more than $2 billion of new funding to address the housing crisis gripping many regions of the state. These budget allocations address one of Cal Cities’ top priorities in our 2022 Action Agenda, which seeks to secure additional funding and resources to increase the supply and affordability of housing. While these investments are significant and critically needed, they are largely one-time expenditures. Cities need an ongoing, long-term financial partnership with the state for the housing crisis to be meaningfully confronted. Cities throughout California also face real challenges associated with the new, significant increase in state-allocated housing goals. Each jurisdiction must plan and zone for these housing units, and cities need additional financial support from the state to fund planning and zoning activities, along with funding for affordable housing production.

Below is a breakdown of the major allocations, programs, and policies proposed in the Governor’s budget.

Housing

• $500 million one-time General Fund over two years ($225 million in 2022-23, and $275 million in 2023-24) for the Infill Infrastructure Grant program, which prioritizes prime infill parcels in downtown-oriented areas and brownfields.
• $300 million one-time General Fund over two years ($75 million in 2022-23, and $225 million in 2023-24) for the Affordable Housing and Sustainable Communities Program to support land use, housing, transportation, and land preservation projects for infill and compact development reducing greenhouse gas emissions. This supplements existing annual Cap and Trade auction proceeds available for this program.
• $100 million one-time General Fund over two years ($25 million in 2022-23, and $75 million in 2023-24) to expand affordable housing development and adaptive reuse opportunities on state excess land sites. This will leverage state land as an asset to expedite housing opportunities by offering low-cost, long-term ground leases in exchange for affordable and mixed-income housing.
• $100 million one-time General Fund over two years ($50 million in 2022-23, and $50 million in 2023-24) for adaptive reuse incentive grants. These grants will help remove cost impediments to adaptive reuse (e.g., structural improvements, plumbing/electrical design, exiting) and help accelerate residential conversions, with a priority on projects located in downtown-oriented areas. These per-unit grants will be paired with other Department of Housing and Community Development (HCD) awards to remove impediments in delivering adaptive reuse projects.
• $500 million one-time General Fund for the Low-Income Housing Tax Credit Program to help spur much-needed affordable housing construction.
• $200 million one-time General Fund over two years ($50 million in 2022-23, and $150 million in 2023-24) for the California Housing Finance Agency to provide loans to developers for mixed-income rental housing, specifically for households with incomes between 30% and 120 % of the Area Median Income.
• $200 million one-time General Fund over two years ($50 million in 2022-23, and $150 million in 2023-24) for the Portfolio Reinvestment Program to further preserve targeted units in downtown-oriented areas and continue increasing the state’s affordable housing stock.
• $100 million one-time General Fund over two years ($25 million in 2022-23, and $75 million in 2023-24) for HCD’s Mobile home Park Rehabilitation and Resident Ownership Program. These funds will finance the preservation and development of affordable mobile home parks, assisting one of the communities disproportionately and negatively impacted by the state’s affordability and climate challenges.

Environmental Quality

One of the Governor’s five main priorities in his proposed budget this year is combating climate change, and billions of additional dollars slated towards wildfires, drought, and coastal issues are included in the proposal. This proposed budget largely builds upon the historic $15 billion investment and plans made in the adopted 2021-22 State Budget. While not nearly the same funding level for climate change projects as the 2021-22 State Budget, the Governor is keeping to his already proposed funding plans.

The Governor’s proposed climate change allocations fit well within Cal Cities’ Action Agenda, which prioritizes the need for disaster preparedness, resiliency, and recovery funding and resources. Some of the notable proposed investments include:

Wildfires

• $1.2 billion over two years to support wildfire and forest resilience programs, including:
  • $482 million for resilient forest and landscapes by funding thinning forests, replanting trees, expanding grazing, and utilizing prescribed fire.
  • $100 million for reforestation to help recover critical watersheds burned in catastrophic wildfires.
  • $382 million for wildfire fuel breaks for the California Department of Forestry and Fire Protection (CAL FIRE) and the Climate Conversation Corps to complete strategic fuel breaks projects over the next several years.
  • $44 million for community hardening for the California Governor's Office of Emergency Services (Cal OES), CAL FIRE, and the University of California Fire Advisors program to improve defensible space and retrofits to “harden” homes and communities against wildfire ignitions.
  • $100 million for regional targeted investments that will include technical support to develop cross‑jurisdictional regional plans, identify projects, and support project implementation.

Drought

• $750 million to support drought resilience and response. Significant investments include:
  • $145 million for urban and small community drought relief in the form of local emergency drought assistance and grants to local water agencies facing a loss of water supplies.
  • $30 million for groundwater recharge projects.
  • $250 million for drought contingency planning.
• $3.725 billion in federal dollars over the next five years to improve local water infrastructure.

Extreme Heat

• $175 million to further the $800 million committed over three years in the 2021-22 State Budget related to addressing extreme heat. Significant investments include:
  • $100 million for urban and community forestry and urban greening to cool communities through expanding tree canopies.
  • $25 million for community resilience and heat programs to reduce the impacts of extreme heat and the heat island effect.
  • $25 million to fund community resilience centers program to support vulnerable residents experiencing emergency situations brought about by the climate crisis.
  • $25 million to accelerate energy-efficient updates to low-income households.

Coastal Issues

• $400 million to further the $612 million committed over three years in the 2021-22 budget related to addressing coastal issues. Significant investments include:
  • $350 million for coastal protection and adaptation for coastal wetland protection and restoration.
  • $50 million for projects that protect and restore healthy ocean and coastal ecosystems.

Climate Resilience

• $325 million to further the $819 million committed over three years in the 2021-22 budget related to addressing climate resilience. Significant investments include:
  • $165 million for the Transformative Climate Communities Program.
  • $135 million to provide direct investments in regional climate collaboratives and resilience planning, implementation, and resilience projects.
  • $4.7 million for the California Climate Action Corps to help take action against climate change.
• $2 billion over two years for clean energy projects. Significant funding includes:
  • $380 million for long-duration storage and to support grid resiliency.
  • $962.4 million for equitable building decarbonization.

Circular Economy

• $65 million to further the $270 million committed over two years in the 2021-22 budget related to addressing the circular economy, such as organic waste diversion and recycling programs. Investments are aimed at shifting the state’s focus to a more resilient and renewable economy.

Revenue and Taxation 

The January budget proposes eleven notable tax changes with an impact on state revenues of over $6 billion, explaining the significant difference between the Governor’s estimate of discretionary revenue and the Legislative Analyst’s Office. Notably, Gov. Newsom seeks to pause the annual inflation adjustment to gasoline taxes but has committed to identifying funds to backfill local shares. Below is a breakdown of several proposed tax changes:

• Eliminates the usage limits of net operating losses, thereby restoring businesses’ ability to use the tool one year earlier than planned.
• Introduces a new tax credit to incentivize climate change adaptation companies to headquarter or maintain headquarters in California.
• Improves the Shuttered Venue Operators Grant by conforming California’s tax handling of these grants to the federal treatment through exempting the grant amount from taxable income and allowing normal expense deductions related to those grants.
• Maintains the State and Local Tax deduction workaround through a pass-through entity tax and makes statutory changes to improve access by various entities.
• Pauses the annual gas tax inflation adjustment. This pause is expected to decrease fuel tax revenues by $523 million in 2022-23 based on an estimated 5.6 % inflation rate. The Administration intends to hold local revenues harmless.
• Provides tax liability flexibility for working families. Specifically, for tax years 2019, 2020, and 2021, families with less than $150,000 in adjusted gross income ($75,000 for individuals) will have until Sept. 30, 2023, to pay any personal income tax liability for those years and will be relieved of any penalties and interest related to delayed filing or delayed payment.

Transportation, Communications, and Public Works

Local streets and roads make up over 85% of the roadway network in California, with local jurisdictions maintaining more than 144,000 centerline miles of local streets and roads. The Governor's proposed budget addresses one of Cal Cities’ 2022 Action Agenda priorities by outlining a plan to deliver more than $20 billion of planned state highway repair and rehabilitation projects in the State Highway Operations and Protection Program over the next five years. This will be supplemented by an estimated $14 billion of additional funding from the bipartisan federal Infrastructure Investment and Jobs Act over the next five years, with potentially billions more in competitive grant opportunities.

Additionally, to help the state meet its existing zero-emission targets, the budget proposes significant investments to strengthen electric vehicle charging infrastructure and incentivizes the transition to zero-emission vehicles. Below is a breakdown of the major allocations, programs, and policies proposed in the state budget.

Transportation

• $9.1 billion of one-time General Fund and bond funds over two years for transportation programs and projects that align with climate, health, and equity goals. This amount includes:
  • $4.2 billion to complete the construction of high-speed rail in the Central Valley, perform advance work for service between Merced and Bakersfield, and complete project design and planning for the remaining project.
  • $2 billion for high-priority transit and rail infrastructure projects that improve connectivity between local, regional, and state services.
  • $1.25 billion for local and regional projects in Southern California that focus on mobility and greenhouse gas reduction.
  • $750 million for active transportation networks to improve equity and support carbon-free transportation options.
  • $500 million for high-priority grade separation projects to support critical safety improvements throughout the state.
  • $400 million for state and local climate adaptation projects that support climate resiliency and reduce risks from climate impacts.
• $4.5 billion two-year increase of base federal funding from the federal Infrastructure Investment and Jobs Act for highways, roads, transit, safety, research, and other transportation activities.

Zero-Emission Vehicles Acceleration

• $6.1 billion over the next five years, combined with $3.9 billion from the 2021-22 State Budget, for a total of $10 billion for zero-emission vehicles, including doubling the investments for medium- and heavy-duty vehicles.  
• $1.5 billion one-time Proposition 98 funds to support zero-emission school transportation programs to provide local educational agencies the ability to acquire electric school buses and construct charging stations.
• $1.2 billion to incentivize the deployment of 100,000 new electric vehicle charging stations and the acquisition of new passenger electric vehicles.
• $935 million to add zero-emission short-haul (drayage) trucks and 1,700 zero-emission transit buses.
• $419 million to support sustainable community-based clean mobility options in low-income communities.

Infrastructure

• $2.3 billion for supply chain investments, including $1.2 billion for port, freight, and goods movement infrastructure and $1.1 billion for other related areas, such as workforce training, zero-emission port equipment, and infrastructure related to the supply chain.

Governance, Transparency, and Labor Relations

The Governor’s budget focuses on pandemic response and recovery, including proposed funding to increase vaccination rates and expand COVID-19 testing. The Governor is requesting that early action be taken on his $2.7 billion pandemic recovery and response proposal. Below are highlights proposed in the Governor’s budget.

Pandemic Response 

• $1.4 billion in early action to maintain and expand COVID-19 mitigation efforts, including efforts to increase vaccination rates and testing.  
  • $214 million to maintain and expand testing operations. 
  • $399 million for vaccine distribution and administration.  
• $1.3 billion for 2022-23 to continue COVID-19 mitigation efforts.  
  • $362 million for testing.  
  • $182 million for vaccine distribution and administration.  
• Ongoing legislative discussions to modify the previous COVID-19 Supplemental Paid Sick Leave policy.  

Unemployment Insurance Debt  

• Provides employer relief via a paydown of Unemployment Insurance debt. 
  • $3 billion General Fund over two years ($1 billion in 2022-23, and $2 billion General Fund in 2023-24) to pay down a portion of the debt. 
• $470.1 million one-time General Fund to pay the forecasted Unemployment Insurance interest payment in September 2022. 

Unfunded Pension Liabilities  

• $3.9 billion for the state’s annual contribution to CalPERS for the state plan.

Public Safety

The Governor has made public safety one of his five budget pillars. As cities experience increases in property crimes and retail theft, the Governor has established an Organized Retail Theft Task Force that will work with local law enforcement to focus on organized theft and bolster the local law enforcement response and prosecution. Another pillar is climate change, and as part of that, the Governor’s budget also includes robust resources to enhance the California Department of Forestry and Fire Protection’s firefighting mutual aid capabilities. Below is a summary of important components.  

Organized Retail Theft 

• $6 million in 2022-23 to provide a total of $15 million ongoing annually for the California Highway Patrol to expand and make permanent its Organized Retail Theft Taskforce.  
• $85 million annually through 2024-25 in competitive grants for local law enforcement to combat organized retail crime.  
• $10 million annually through 2024-25 for competitive grants to local district attorneys to create retail theft prosecution teams.  
• $6 million annually through 2024-25 and $500,000 ongoing to the California Department of Justice (DOJ) to support regional task forces combating organized retail theft and prosecute retail theft cases spanning multiple jurisdictions.  
• $5 million for the DOJ to continue leading anti-crime task forces around the state.  
• $20 million one-time for grants to small businesses impacted by retail theft to assist with repairing or replacing infrastructure to resume business operations. 

Miscellaneous Public Safety 

• $7.5 million General Fund ($6 million ongoing) and 10 positions to implement the new federally-mandated 9-8-8 call system to assist those experiencing a behavioral or mental health crisis.  
• $22.7 million General Fund in 2022-23 and $20.6 million ongoing for the Commission on Peace Officer Standards and Training (POST) to support the implementation of SB 2 (Bradford, Statutes of 2021), which authorized POST to suspend, revoke, or cancel any peace officer certifications under specified conditions 
• $5 million one-time General Fund in 2022-23, to be spent over three years, to support the physical, mental, and emotional health of local law enforcement personnel through sustainable wellness programs, training, and research. 
• $25 million to provide matching grants for local government gun buyback programs. 
• $20 million for a drug interdiction program at the California-Mexico border. 
• $4 million one-time General Fund for grants to reduce local law enforcement agencies’ sexual assault kit backlog. 
• $10.6 million annually for three years to continue the Returning Home Well Program to provide transitional housing to parolees at risk of housing insecurity or homelessness.    

Emergency Preparedness/Response: 

• $2 billion ($541.1 million General Fund) and 1,507.2 positions for the California Governor's Office of Emergency Services (Cal OES) to respond, direct, and coordinate state and federal resources and mutual aid assets across all regions to support diverse communities throughout the state.  
• $61.9 million ($61.6 million General Fund) and 83 positions to address more frequent, complicated, and often simultaneous emergencies and disasters involving numerous counties and regions throughout the state. 
• $45 million General Fund annually for three years for California Department of Forestry and Fire Protection (CAL FIRE) to secure ten additional helicopters.  
• $99 million General Fund in 2022-23 and $11.7 million ongoing to purchase four additional helicopters to support 24/7 operations of the enhanced helicopter fleet.  
• $35.8 million General Fund in 2022-23 and $2.8 million ongoing for surge capacity dozers and fire engines.  
• $68.6 million General Fund in 2022-23, $81.3 million ongoing, and 33 positions to convert 16 existing seasonal crews to year-round availability and add 20 new permanent fire crews to the statewide system.  
• $11.2 million General Fund in 2022-23, $10.9 million ongoing, and 11 positions to enhance the California State Fire and Rescue Mutual Aid System’s fire fleet.  
• $30 million and 31 positions ($5.6 million and 20 positions for CAL FIRE) to establish the Fire Integrated Real‑time Intelligence System program to increase the real-time information and situational awareness available to the state and California’s mutual aid system responders and managers on all hazards events, including wildfires.  
• $5.8 million ($5.5 million General Fund) and 20 positions to enhance Cal OES’s regional response capacity and key partnerships with local governments and other local stakeholders.  
• $17.1 million ongoing General Fund to support the California Earthquake Early Warning Program’s education and outreach, operations, research, and development. 

Cannabis 

• $5.5 million to begin the planning process for a single licensing system for all license types, and to begin the process of shifting some existing licensing data to support an eventual transition into a unified system.  
• $2 million to develop a data warehouse to store and query Department of Cannabis Control data, appropriate processes, and procedures to maintain data integrity, data displays, and visualizations for its website.  
• $6.1 million to launch a multiyear consumer education and awareness campaign.  

Community Services 

The Governor's budget includes significant community service investments that will benefit residents throughout the state, most notably unhoused residents. The proposed budget includes $8 billion for homelessness resources in 2022-23, following through on many of the commitments made last year. Additionally, there is a continued focus on supporting children and childcare, families, seniors, and open spaces.   

Homelessness 

• $2 billion increase over the next two years to expand access to housing for vulnerable populations with complex behavioral health conditions and people living in encampments.   
• $1.5 billion increase for Department of Health Care Services Behavioral Health Continuum Infrastructure Program to purchase and install tiny homes and provide operational supports. 
• $500 million increase for jurisdictions to invest in rehousing strategies for people experiencing homelessness in encampments around the state. 
• $10.6 million annually for three years to continue the Returning Home Well Program to provide transitional housing to parolees at risk of housing insecurity or homelessness.    

Children and Childcare 

• $5.8 billion for childcare programs, including continued support for the historic multiyear commitment to rate increases, supplemental funding to providers, infrastructure grant program funding, and the eventual expansion of childcare access by 200,000 slots.  

• $25 million for the Child Care Initiative Project to address areas underserved by childcare providers, increase childcare slots, and support providers wanting licensure. 
• $10.6 million for the California Infant and Early Childhood Mental Health Consultation program to support the mental health needs of children, families, and childcare providers.  

• $10 million to expand early literacy efforts by providing multilingual books and early literacy programming for families with young children. 
• An additional $3.4 billion for the Expanded Learning Opportunities Program, which supports summer, before, and after school programs. 
• $4.7 million over three years to continue operation of a helpline that helps deliver services to children, families, and caregivers. 

Libraries 

• $5 million to expand the number of library jurisdictions providing summer meal programs for students in low-income communities. 
• $12.8 million and $1.2 million ongoing to support the digitization of historically and culturally significant materials. 
• $8.8 million increase to support free online job training and educational upskilling programs available through local public libraries. 

Seniors and Aging 

• $2.1 million to bolster the Master Plan for Aging’s Data Dashboard to drive outcomes and sustain public engagement for statewide initiatives through the Department of Aging. 
• $10 million for programs to engage older adults in volunteer service.  
• $35.2 million for the California Food Assistance Program General Fund to expand the program to Californians age 55 and older. 

Parks 

• $50 million for the Department of Parks and Recreation to create new California Cultural and Art Installations in the Parks Program for state and local parks.
•  $756.9 million for the Department of Parks and Recreation to support the Outdoor for All Initiative focused on equitably expanding outdoor access to all Californians.

California Volunteers 

• $10 million ongoing to expand California’s existing volunteer infrastructure and bolster the statewide Neighbor-to-Neighbor initiative to recruit, train, equip, and organize neighbors to address community needs. 
• Permanently continues funding the California Climate Action Corps Program at its existing funding level of $4.7 million to support its mission of empowering Californians to take meaningful actions to protect their communities against the harshest impacts of climate change. 

California Arts Council 

• $30 million to be spent over three years to support 14 existing cultural districts. 

Community Health  

• $1.7 billion in Care Economy Workforce investments, including funding to recruit and train 25,000 new community health workers, as well as additional psychiatric providers. 
• $350 million to recruit, train, and certify 25,000 new community health workers with specialty certifications in areas that include climate health, homelessness, and dementia. 
• $50 million for the CalFood program to mitigate increases in food needs among low-income and food-insecure populations throughout the state. 
• $7.5 million for the California Governor's Office of Emergency Services to advance implementation of the 9-8-8 call system mental health crisis call centers.