The good, the bad, and the obscure changes in the “final” budget deal

State budget agreement contains some wins for cities, but ignores growing homelessness and affordable housing crisis

People rarely get everything they want in politics, especially when a $31.5 billion budget deficit is involved.

First, the good news: The “final” budget deal contains zero ongoing cuts to core city programs and does not redirect city funds to address the budget deficit.

This could change later this year if revenues continue to decline. If the state’s economic conditions change too much, Gov. Gavin Newsom will delay one-time spending commitments, kicking off a mid-year budget revision.

The legislative attempt to restore $1.1 billion in public transportation funding made it into the final budget. That brings the total commitment to $5.1 billion over four years but with the caveat of new accountability measures. That funding will get major transit agencies through the next few years.

There were also some modest restorations to first-time homebuyer and foreclosure prevention programs. That brings the total statement investment in affordable housing and homelessness to $3.2 billion.

The final budget also includes approximately $35 million to backfill certain local governments for insufficient Educational Revenue Augmentation Fund amounts. The Governor's proposed budget failed to include those funds — the first time since 2004. This would have created significant general purpose revenue reductions. Legislators restored the funding at Cal Cities’ urging.

A short-sighted approach to homelessness

Now, for the bad news. Legislators wanted to add an additional $1 billion in funding for the Homeless Housing, Assistance and Prevention grant program. Instead, the final budget agreement includes intent language to allocate an additional $1 billion for the 2024-25 fiscal year.

This marks the third year that lawmakers have doled out $1 billion for the program. To their credit, lawmakers did honor commitments made in previous budgets. However, the allocation falls far short of Cal Cities’ call for ongoing funding.

Yet again, lawmakers have chosen to prioritize short-term fixes over long-term, sustainable solutions. Virtually everyone, including legislators, agrees that a crisis this historic needs a historic amount of funding. But when push comes to shove, lawmakers turn their back on the state’s most vulnerable residents.

“Addressing the many facets of homelessness ... has the same established need for funding as education, prisons or parks,” said the Sacramento Bee in a recent editorial. “Yet homelessness has no similarly established home in the state budget. It has to fight for the leftovers. Big city mayors end up fending for themselves and heading home with far less than they need.”

The deal also maintains some of the money allocated for climate resilience programs. However, that funding relies on the passage of a climate bond in 2024 and federal climate funding.

Gann Limit subvention clarifications

Now for the obscure. The budget provides clarity for cities calculating state subventions (unrestricted money received by a local agency from the state) and local appropriations limits. Under previous rules, local agencies had to identify and report any new state subventions that would cause them to exceed local appropriations limits. This created significant confusion.

Under the new budget, the California Department of Finance must calculate the individual subvention amounts for each of the state programs no later than Feb. 1 of each year. Cal Cities will receive the information for distribution to cities. This will provide greater clarity and assurances to cities that their local appropriations limit calculations can be relied upon.

Although the budget cycle is mostly over, Cal Cities will continue to advocate for ongoing funding to help ensure all Californians have a roof over their head and access to the services they deserve.