State budget agreement addresses many Cal Cities priorities, but disregards continued calls for direct relief

Jun 30, 2021

Gov. Gavin Newsom signed the primary budget bill (AB 128, Ting) on June 28, which outlines the framework for the $262.2 billion spending plan for the new fiscal year. 

An agreement between the Legislature and Governor on the key implementation details of the adopted budget was just reached this week, and those spending details are included in a “budget bill junior” (SB 129, Skinner), which is on the Governor’s desk awaiting signature.

SB 129 addresses many of Cal Cities’ key priorities and includes significant investments in housing, homelessness, broadband deployment, and basic infrastructure. It also includes funding for disaster preparedness, resiliency, and recovery. Unfortunately, the budget agreement does not include the $2 billion in direct, flexible aid needed to fill cities’ budget gaps or the $225 million ask for funding to cities and counties for organic waste regulation implementation.

A brief summary of key areas included in SB 129 are below. The budget process will continue for several more weeks, as additional details on the spending plan will be determined through budget trailer bills. Cal Cities will continue to lobby on behalf of cities’ interests as supplemental budget bills are considered in the Legislature.  

Revenue and Taxation
The state continues utilizing its record surplus to pay down debt, honor deferrals, and prepare for rising outyear costs. Notably, the Legislature and Governor have chosen to preserve or augment, rather than take or penalize, local government revenues. Nonetheless, this budget continues sales tax exemptions across several policy areas.

Housing and Homelessness
The budget agreement contains significant new funding for numerous housing and homelessness programs supported by Cal Cities. Many of these allocations will require additional trailer bills. Most notably, the $1 billion earmarked for local governments to address homelessness contains few details about the new, “robust” oversight and accountability measures. The budget also contains $250 million for Homekey within the Multifamily Housing Program, bringing the total Homekey investment to $1.45 billion.

Housing (SB 129, Skinner: Sections 55-58)
  • $50 million for the Serna Jr. Farmworker Housing Grant Program at Housing and Community Development;
  • $10 million for a grant program for local governments to incentivize the conversion of idle commercial properties to affordable housing;
  • $50 million in one-time General Fund resources to expand the Golden State Acquisition Fund (GSAF), which, combined with matching funds, GSAF makes up to five-year loans to developers for acquisition or preservation of affordable housing; and
  • $100 million to the California Housing Finance Agency (CalHFA), to expand CalHFA’s homebuyer assistance program and begins the process of developing the California Dream for All First Time Homebuyer Program to be used for homebuyer assistance.
Homelessness (SB 129, Skinner: Sections 17, 18, 55, 57, 58, 170, 176)
  • $250 million in General Fund for HomeKey within the Multifamily Housing Program, bringing the total investment to $1.45 billion.
  • $4 million for a homeless data system at the Business, Consumer Services, and Housing Agency;
  • $285 million General Fund for the Department of Social Services for the CalWORKs homeless program;
  • $50 million to address encampments for persons experiencing homelessness;
  • $300 million General Fund one-time for the Home Safe Program over two years to help combat senior homelessness;
  • $380 million one-time for the CalWORKs Housing Support Program over two years to house families in the program, and help them avoid eviction.
Environmental Quality
The budget agreement includes approximately $3.7 billion for climate resiliency, which will be spent over three years, roughly $1 billion for a wildfire prevention and resilience package — also over multiple years — and a $3 billion water and drought package. The budget also contains billions of dollars in funding for other environmental issues, most notably $40 million for sea level rise grants for local governments.

Notably, funding for recycling is $65 million. Any remaining funding will most likely be in cap and trade, a $700 million program that will require additional legislation later this year.

Climate Resiliency Package (SB 129, Skinner: Sections 272)
  • $2.5 billion in General Fund.
    • $730.7 million for water and drought resilience package. 
    • $440 million on a one-time basis for a climate resiliency package.
    • $65 million on a one-time basis for a circular economy package.
    • $200 million for local parks grants.
    • $258 million for wildfire prevention and forest resiliency package.
Office of Planning and Research (OPR) (SB 129, Skinner: Section 35)
  • $185 million to OPR for cities for local assistance, $150 million to the 13 largest cities, and $35 million to all cities under 300,000 population.
Sea Level Rise (SB 129, Skinner: Section 92)
  • $40 million for sea level rise grants for support or local assistance to local governments.
Wildfire (SB 129, Skinner: Sections 78 and 79)
  • Approximately $39.5 million from the Greenhouse Gas Reduction Fund (GGRF) to CalFIRE for healthy forest and fire prevention programs and projects that improve forest health and reduce greenhouse gas emissions caused by uncontrolled wildfires.
  • $35 million from the GGRF to CalFIRE to complete prescribed fire and other fuel reduction projects through proven forestry practices consistent with the recommendations of the Forest Carbon Plan, including the operation of year-round prescribed fire crews and implementation of a research and monitoring program for climate change adaptation.
Water (SB 129, Skinner: Sections 112, 127, 128)
  • $663 million for local assistance to Department of Water Resources; includes $100 million for urban community drought relief, and $3 million for immediate drought support.
  • $1.385 billion to the State Water Resources Control Board; includes $650 million apiece for drinking water and wastewater projects.
  • $985 million to forgive residential and commercial customer arrearages and water enterprise revenue shortfalls from March 4, 2020, to June 15, 2021.
Energy (SB 129, Skinner: Section 164)
  • $993.5 million for California Arrearage Payment Program to reduce delinquent electricity and natural gas utility bill balances for customers experiencing economic hardship from COVID.​
Transportation, Communications, and Public Works
The budget agreement includes $3.75 billion for a statewide, open-access, middle mile broadband network, which is aligned with Cal Cities’ budget request. It is part of an overall $6 billion multi-year broadband infrastructure and improved broadband access package. The middle mile funding comes entirely from the American Rescue Plan Act. That means it will need to be encumbered by the end of 2024.

The budget also contains an increase of $622.4 million for the California Public Utilities Commission — most from federal funds — “for activities to improve broadband infrastructure and affordability.” Those funds are contingent on later legislation.

Some of the recent budget bills provide billions of dollars in new spending for transportation infrastructure, including $3 billion in funding for transportation infrastructure across the state. (This includes active transportation projects and projects identified for completion before 2028.) The budget bill also contains $2 billion for streets, roads, and highway projects, as well as $400 million for a State and Local Transportation Adaptation program.   

As with housing, homelessness, and climate change, much of the transportation investments will require legislation enacted later this year.

Transportation (SB 129, Skinner: Sections 62 and 77)
  • $2.7 billion in funding for a variety of programs related to zero-emission vehicles.
    • $525 million for the Clean Vehicle Rebate Project.
    • $500 million for zero-emission vehicle charging and fueling infrastructure.
    • $500 million in funding for the Clean Truck & Bus.
    • $125 million in zero-emission vehicle manufacturing grants.
    • $475 million for drayage trucks, transit buses, and school buses, and associated infrastructure.
    • $407 million for zero-emission transit investments.
    • $50 million for near-zero truck replacement.
  • $350 million for the first year of a $400 million transportation adaptation grant program.
  • $328 million for a variety of beautification and improvement projects along the state highway system and local streets and roads.
Public Safety
Cannabis (SB 129, Skinner: Sections 52 and 53)
The budget agreement contains spending allocations to transition provisional licenses to more permanent annual licenses under the new single Department of Cannabis Control, including:
  • $30 million for fee waivers and deferrals for social equity applicants.
  • $100 million allocated for the Local Jurisdiction Assistance Grant Program, which will provide funding to local jurisdictions with commercial cannabis licensees needing the greatest assistance in transitioning from a provisional license to an annual license.
Earlier this week, the Governor signed two budget trailer bills with significant impact to cities. In the area of Governance, Transparency, and Labor Relations, the Governor signed SB 152 (Committee on Budget and Fiscal Review), which appropriates $35 million from the General Fund to the Secretary of State to support statewide and county costs of the 2021 gubernatorial recall election. It also authorizes a local government entity that previously called a special local election to consolidate that election with a gubernatorial recall election if all the following conditions are met:
  • The special local election was called prior to June 15, 2021.
  • The original date on which the special local election was called is not more than 30 days before and not more than 30 days after the date of the gubernatorial recall election.
  • The call to consolidate the special local election with the gubernatorial recall election is issued within four days from the date of issuance of the Lieutenant Governor’s proclamation calling a gubernatorial recall election.
In the area of Housing, Community, and Economic Development, the Governor signed legislation to extend the state’s eviction moratorium through September 30, 2021 and clear rent debt for low-income Californians that have suffered economic hardship due to the pandemic. Under AB 832 (Chiu), California will significantly increase cash assistance to low-income tenants and small landlords under the state’s $5.2 billion rent relief program, making it the largest and most comprehensive COVID rental protection and rent relief program of any state in the nation. AB 832 increases the value of the reimbursement the state’s emergency rental assistance program provides to now cover 100 percent of past-due and prospective rent payments, as well as utility bills for income-qualified tenants. AB 832 also allows tenants to access rental funds directly if their landlord chooses not to participate and ensures landlords can receive compensation even if their otherwise income-qualified tenants have already vacated a unit.