January budget proposal closes a $37.86 billion shortfall while protecting key investments in education, public safety, addressing homelessness, mental health care reform, and climate action

Press release from the Office of the Governor:

Governor Gavin Newsom today introduced his 2024-25 state budget proposal, a balanced funding plan that maintains the state’s fiscal stability while preserving key investments for education, public safety, addressing homelessness, mental health care reform, climate action, and other priorities. Using some of the unprecedented budget reserves built up over the years and other tools, this budget responsibly closes a projected $37.86 billion shortfall.

Recognizing increased uncertainty due to a decline in the stock market and federal tax deadline delays, the 2023-24 state budget passed in June set aside record reserves of close to $38 billion to prepare for a potential shortfall.

Despite the downward revision, 2022-23 revenues are estimated to still be 23 percent higher than pre-pandemic levels. California’s GDP remained strong in 2023, and the state’s big three revenues are projected to return to levels consistent with a normal revenue growth trajectory.

Even after the proposed withdrawals, this budget plan reflects $18.4 billion in total budgetary reserves, including $11.1 billion in the Rainy Day Fund.

In addition to addressing the budget shortfall through a balanced package of solutions that avoids deep program cuts, the January budget proposal maintains investments in several priority issues, including:

TACKLING HOMELESSNESS. Governor Newsom has advanced a multi-year $15.3 billion plan to address homelessness – more than ever before in state history. This budget proposal maintains billions of dollars for an all-of-the-above approach including $400 million for encampment resolution grants and $1 billion for Homeless Housing, Assistance and Prevention program grants.

KEEPING CALIFORNIANS SAFE. The budget invests $1.1 billion over four years to increase the safety and security of our communities, including $373.5 million to combat organized retail theft; over $230 million for opioid and fentanyl interdiction and enforcement, naloxone distribution, recovery and support services and more; $302 million to enhance community public safety through nonprofit security grants, officer training and more; and $197 million to tackle gun violence.

TRANSFORMING EDUCATION. The budget maintains investments that are critical to improving supports for students, including funding for community schools, universal school meals, expanded learning opportunities, education workforce, and continued implementation of universal transitional kindergarten. Proposition 98 funding for K-12 schools and community colleges is estimated to be $109.1 billion in 2024-25 and per-pupil funding totals $23,519 per pupil when accounting for all funding sources.

MENTAL HEALTH REFORM. California has advanced a major transformation of the state’s behavioral health services system. This budget includes funding to make wellness coaches available to support children and youth behavioral health and maintains $7.6 billion from various funds to implement the Behavioral Health Community-Based Organized Networks of Equitable Care and Treatment (BH-CONNECT) demonstration.

CALIFORNIA’S CLIMATE COMMITMENT. California is advancing a $48.3 billion multi-year commitment, alongside over $10 billion from the Biden-Harris Administration in federal climate funding, to implement its nation-leading initiatives to slash pollution and achieve carbon neutrality by 2045, protect communities from harmful climate impacts, deliver 90% clean electricity by 2035, hold big oil accountable, and more.

Climate and water spending details from the Governor’s budget proposal

Here are the details as spelled out in the Governor’s Budget Summary.  (Note:  There is no funding in the Governor’s budget for the Delta Conveyance Project, nor is there any funding for groundwater management.)

CLIMATE CHANGE

Excerpts from the Governor’s Budget Summary, pages 33-46

California is on the frontline of the global climate crisis, experiencing record-breaking heat, historic drought, extreme flooding, and devastating wildfires that have affected communities across the state. In response, the state continues to meet the crisis with the scale and urgency it requires—advancing world-leading climate goals, accelerating the transition away from fossil fuels, cutting pollution and delivering more equitable and sustainable communities. The 2021 and 2022 Budget Acts allocated approximately $54 billion—the California Climate Commitment—to fully integrate climate solutions with equity and economic opportunity. Along with critical investments in health, education, and jobs, the state’s climate agenda is simultaneously confronting the crisis while building a more resilient, just, and equitable future for all Californians.

The Governor’s Budget maintains approximately $48.3 billion of these investments over seven years. The Budget prioritizes equity and investments in populations facing disproportionate harm from pollution and the climate crisis. Further, the Budget includes an additional $159.1 million in new climate investments. The Administration also continues to pursue available federal climate funding, including from the Inflation Reduction Act and the Infrastructure Investment and Jobs Act.

To address the projected budget shortfall, the Budget proposes $6.7 billion of General Fund solutions in climate-related programs to achieve a balanced budget including: $2.9 billion in reductions; $1.9 billion in delays of expenditures to future years; $1.8 billion in shifts to other funds, primarily the Greenhouse Gas Reduction Fund (GGRF).

Wildfire and forest resilience

The ongoing impact of climate change on California’s wildlands and decades of underinvestment in forest health continues to create the conditions for longer, more severe fire seasons. The 2021 and 2022 Budget Acts committed $2.8 billion over four years to continue strengthening forest and wildfire resilience statewide.

The Budget maintains $2.7 billion of these investments over five years to advance critical investments in restoring forest and wildland health to continue to reduce the risk of catastrophic wildfires in the face of extreme climate conditions. The Budget includes $100.7 million in General Fund reductions and $162.5 million in fund shifts across various programs and continues $200 million from the GGRF consistent with Chapter 626, Statutes of 2018 (SB 901) and Chapter 258, Statutes of 2021 (SB 155).

ADDRESSING THE BUDGET PROBLEM

To address the projected budget shortfall, the Budget proposes General Fund solutions to achieve a balanced budget. These include:

• Expenditure Reductions—A reversion of $100.7 million General Fund for various programs with indirect benefits to fuels treatment or limited-term projects, including Biomass to Hydrogen/Biofuels pilot ($43.5 million), Conservancy Project Implementation in High-Risk Regions ($27.7 million), Home Hardening Pilot ($12 million), Monitoring and Research ($5.7 million), Prescribed Fire and Hand Crews ($5.3 million), Forest Legacy ($3.6 million), and Interagency Forest Data Hub ($2.9 million).
• Fund Shifts—A shift of $162.5 million General Fund to the GGRF across 2023-24 and 2024-25 to maintain critical investments in direct fuels treatment programs that restore forest health, build wildfire resilience, and reduce Greenhouse Gas emissions from catastrophic wildfires, including Fire Prevention Grants ($82 million shift within 2023-24), Stewardship of State-Owned Land ($34.5 million shift to 2024-25), Department of Forestry and Fire Protection Unit Fire Prevention Projects ($26 million shift to 2024-25), and Regional Forest and Fire Capacity ($20 million shift to 2024-25).

Water

California continues to experience large swings between drought and flood; due to climate change, these swings are becoming more severe.

The 2021 and 2022 Budget Acts committed $8.7 billion over multiple years to support drought resilience and response programs to help communities, agriculture, and fish and wildlife avoid immediate impacts from extreme drought, while advancing projects and programs that will improve the state’s resilience to future droughts and floods.

The Budget maintains $7.3 billion of these investments over multiple years in programs and projects to bolster the capacity of communities and ecosystems to endure droughts and floods. The Budget includes $796.8 million in General Fund reductions and $100 million in delays across various programs. The Budget also includes $159.1 million in new investments to support flood protection, levee repair, and restoration of the Salton Sea.

Flood Protection

California continues to adaptively respond to historic climate whiplash through timely implementation of flood risk reduction projects while bolstering flood readiness. Building on the Administration’s continued commitment to addressing statewide flood impacts, the Budget includes $93.9 million one-time General Fund to support critical flood safety efforts. These include:

• $33 million General Fund to support the state cost share of continuing U.S. Army Corps of Engineers projects and Urban Flood Risk Reduction projects that address flood risk reduction, as well as the associated state operations costs to implement the projects.
• $31.3 million General Fund to support the continuation of existing multi-benefit flood risk reduction projects in the Central Valley.
• $29.6 million General Fund to address storm damage at State Plan of Flood Control facilities and State-owned Delta lands for critical repairs associated with the 2023 storms.

Salton Sea Management Program

State Water Resources Control Board Order WR 2017-0134 (Order) requires the state to construct 29,800 acres of habitat and dust suppression projects on the exposed lakebed at the Salton Sea by 2028. The Salton Sea, California’s largest lake, is receding due in part to existing water conservation actions in the Imperial Valley that have reduced inflows to the Sea. Areas of exposed lakebed reduce important environmental habitat and can contribute to harmful dust emissions. The Salton Sea Management Program (SSMP), coordinated by the Natural Resources Agency, Department of Water Resources (DWR), and Department of Fish and Wildlife, is implementing restoration projects at the Salton Sea to suppress dust and create wildlife habitat.

As of the beginning of 2023, the SSMP has completed over 2,000 acres of interim dust suppression and 5,800 acres are currently under construction and nearing completion. To meet the state’s legal requirements, the SSMP will simultaneously continue to scale up planning, permitting, and implementation of restoration projects, while adding new capacity to maintain and monitor completed projects and the Salton Sea ecosystem.

The Budget includes $65.2 million General Fund for the SSMP to continue progress towards meeting the requirements of the Order. The funding included in the Budget will support technical assistance and project management operations and maintenance, monitoring environmental compliance, conducting restoration project planning, and improving public outreach and communication.

ADDRESSING THE BUDGET PROBLEM

To address the projected budget shortfall, the Budget proposes General Fund solutions to achieve a balanced budget. These include:

• Watershed Climate Resilience Programs—A reversion of $88.4 million General Fund and a reduction of $350 million over the next two years for various watershed climate resilience programs within the DWR and the Wildlife Conservation Board. The Budget maintains $56 million previously allocated to these programs.
• Water Recycling—A reversion of $174.4 million General Fund and a delay of $100 million until 2025-26 for water recycling and groundwater cleanup. The Budget maintains $348 million previously allocated to this program.
• Per- and Polyfluoroalkyl Substances—A reversion of $71.6 million General Fund and reduction of $30 million in 2024-25 for Per-and Polyfluoroalkyl support. The Budget maintains $53 million previously allocated to this program.
• Dam Safety—A reversion of $50 million General Fund for dam safety investments. The Budget maintains $50 million previously allocated to this program.
• State Water Efficiency and Enhancement Program—A shift of $20.6 million General Fund to the GGRF for the State Water Efficiency and Enhancement Program. Funding being shifted for the Program is delayed to 2024-25.
• Relief for Small Farmers—A reversion of $12.9 million California Emergency Relief Fund for drought relief to small farms. The Budget maintains $17 million previously allocated to this program.
• Forecasted Informed Reservoir Operations/Snow Surveys—A reduction of $6.75 million General Fund ongoing for Forecast Informed Reservoir Operations for runoff forecasting. The Budget maintains $10 million ongoing in baseline support for the program.
• On-Farm Water Use and Agriculture Technical Assistance—A reversion of $6 million California Emergency Relief for on-farm water use and agriculture technical assistance. The Budget maintains $9 million previously allocated to this program.

Nature-based solutions

California’s natural and working lands are essential to combating climate change and protecting the state’s world-renowned biodiversity as the state works towards achieving the 30×30 goal, which establishes a state goal of conserving 30 percent of California’s lands and coastal waters by 2030. Trees, plants, grasses, and soils remove and store carbon dioxide from the atmosphere. Healthy landscapes can provide a powerful “sink” to absorb greenhouse gases and help achieve the state’s 2045 carbon neutrality goal. The Administration is advancing several efforts to enlist nature in the state’s climate goals.

The 2021 and 2022 Budget Acts committed $1.6 billion for nature-based solutions. The Budget maintains $1.4 billion of these investments over multiple years in various programs. The Budget includes $15 million in General Fund reductions across two programs.

ADDRESSING THE BUDGET PROBLEM

To address the projected budget shortfall, the Budget proposes General Fund solutions to achieve a balanced budget. These include:

• Redondo Beach Wetlands Restoration—A reversion of $10 million General Fund for Redondo Beach Wetlands Restoration.
• Resource Conservation Investments Strategies—A reversion of $5 million General Fund for Resource Conservation Investments Strategies.

Community Resilience

California’s communities face complex challenges from climate change—both from its direct impacts and from its compounding effects on existing stressors and inequities—which is why California’s Climate Adaptation Strategy prioritizes the protection of vulnerable communities.

The 2021 and 2022 Budget Acts committed $1.9 billion for community resilience investments over multiple years to advance climate resilience in low-income and underrepresented communities. The Budget maintains $1.2 billion of these investments over multiple years in programs and projects to promote community resilience. The Budget reflects $89.8 million of General Fund reductions across various programs.

ADDRESSING THE BUDGET PROBLEM

To address the projected budget shortfall, the Budget proposes General Fund solutions to achieve a balanced budget. These include:

Regional Climate Resilience—A reversion of $25 million General Fund and a reduction of $50 million for the Regional Climate Resilience Program at the Office of Planning and Research. The Budget maintains $25 million previously allocated to this program.

Regional Climate Collaboratives—A reversion of $9.8 million General Fund for Regional Climate Collaboratives Program at the Strategic Growth Council within the Office of Planning and Research. The Budget maintains $10 million previously allocated to this program.

Climate Adaptation and Resilience Planning Grants—A reversion of $5 million General Fund for the Climate Adaptation and Resilience Planning Grants at the Office of Planning and Research. The Budget maintains $20 million previously allocated to this program.

Coastal Resilience

The impacts of climate change on the coast and ocean include sea-level rise, more extreme storm events, coastal erosion, increased water temperatures, and ocean acidification. These impacts affect public and private property and infrastructure, public access to and along the coast, ecosystem health, and California’s coastal economy, including tourism and fishing.

The 2021 and 2022 Budget Acts committed $1.3 billion for coastal resilience over multiple years. The Budget maintains $660 million of these investments over multiple years in programs and projects for coastal resilience. The Budget reflects $452 million in General Fund reductions and $36.8 million in fund shifts across several coastal protection and adaptation programs.

ADDRESSING THE BUDGET PROBLEM

To address the projected budget shortfall, the Budget proposes General Fund solutions to achieve a balanced budget. These include:

• Sea Level Rise—A reversion of $220.9 million General Fund for Sea Level Rise activities. The Budget maintains $333.6 million previously allocated for this program.
• Coastal Protection and Adaptation—A reversion of $171.1 million General Fund for Coastal Protection and Adaptation activities. The Budget maintains $154.9 million previously allocated for this program.
• SB 1 Implementation—A reversion of $25 million General Fund and shift of $36.8 million to the GGRF in 2024-25 for implementation of Chapter 236, Statutes of 2021 (SB 1). The Budget maintains $77 million previously allocated for this program.
• Ocean Protection—A reversion of $35 million General Fund for Ocean Protection funding at the Ocean Protection Council. The Budget maintains $65 million previously allocated for this program.

NATURAL RESOURCES AND ENVIRONMENTAL PROTECTION

Excerpted from the Governor’s Budget Proposal, pages 47-52

T he Natural Resources Agency consists of 29 departments, boards, commissions, and conservancies responsible for administering programs to conserve, restore, and enhance the natural, historical, and cultural resources of California. The Governor’s Budget includes total funding of $9 billion ($5.5 billion General Fund, $2.7 billion special funds, $337.1 million federal funds, and $477.1 million bond funds) for the programs included in this Agency.

The California Environmental Protection Agency consists of six departments and boards responsible for implementing the state’s climate priorities, reducing greenhouse gas emissions, enhancing air and water quality, achieving the state’s waste reduction and circular economy goals, and protecting public health. The Secretary coordinates the state’s regulatory programs and provides fair and consistent enforcement of environmental law. The Budget includes $5.4 billion ($719.7 million General Fund, $4.1 billion special funds, $564.7 million federal funds, and $11.3 million bond funds) for programs included in this Agency.

To address the projected budget shortfall, the Budget proposes $489.9 million of General Fund solutions in non‑climate Natural Resources and Environmental Protection related programs to achieve a balanced budget. Climate efforts are discussed in the Climate Change Chapter.

Protecting water quality and habitat

Last year, in Sackett v. EPA, the U.S. Supreme Court significantly narrowed the reach of the federal Clean Water Act, ruling that the Act no longer covered many of the wetlands that had long been protected under federal law. California is well positioned to maintain protections for these wetlands under state law. Existing state programs, however, have operated for decades with the backdrop of federal jurisdiction over these waters, necessitating updates to reflect the new regulatory landscape.

The Budget includes $6.1 million Waste Discharge Permit Fund in 2023‑24, and $7 million ongoing for the State and Regional Water Boards to conduct essential activities to protect these waters, including water quality permitting and enforcement work that has historically been conducted by the U.S. Army Corps of Engineers and the U.S. Environmental Protection Agency.

ADDRESSING THE BUDGET PROBLEM

To address the projected budget shortfall, the Budget proposes General Fund solutions to achieve a balanced budget. These include:

• Cleanup in Vulnerable Communities Initiative—A delay of $175 million General Fund for the Department of Toxic Substances Control’s Cleanup in Vulnerable Communities Initiative Program. The Budget includes $85 million in funding for the program in 2025‑26 and $90 million in 2026‑27.
• Underground Storage Tank Cleanup Fund Loan—A budgetary loan of $150 million, along with a one‑year repayment deferral of an existing $50.7 million budgetary loan, from the Underground Storage Tank Cleanup Fund to the General Fund is proposed from resources not currently projected to be used for operational or programmatic purposes.
• California Beverage Container Recycling Fund Loan—A budgetary loan of $125 million, along with a one‑year repayment deferral of an existing $25 million budgetary loan, from the California Beverage Container Recycling Fund to the General Fund is proposed from resources not currently projected to be used for operational or programmatic purposes.
• Outdoor Equity Grants Program—A reduction of $25 million General Fund for outdoor environmental education and access programs through the Outdoor Equity Grants
• Program under Chapter 675, Statutes of 2019 (AB 209). The Budget maintains $90 million General Fund previously allocated for this program.
• Urban Waterfront Funding—A reversion of $12.3 million General Fund for various projects in urban areas adjacent to rivers and waterways throughout the state. The Budget maintains $142 million General Fund previously allocated for this program.
• Pesticide Notification—A reversion of $2.6 million General Fund related to the Pesticide Notification Network previously appropriated in the 2021 Budget Act. The Budget maintains $7.3 million previously allocated for this purpose.

INFRASTRUCTURE

Excerpted from the Governor’s Budget Proposal, pages 105-122

California is making the biggest investment in infrastructure since the 1950s and 60s. The $180 billion investment over the next ten years will create 400,000 job opportunities and is a once-in-a-generation drive that will benefit communities across the state. In partnership with the Legislature, the Governor signed legislation last year to accelerate critical infrastructure projects across California that will help build a 100 percent clean electric grid, strengthen the state’s water resiliency and boost water supply, and modernize the state’s transportation system. The state begins 2024 with $41 billion already at work thanks to historic state funding and unprecedented help from the Biden-Harris Administration. These projects will:

• Build a new system of clean energy.
• Move away from dirty fossil fuels.
• Build and repair roads, bridges, and public transit.
• Bring high-speed internet to every Californian.
• Clean the air and restore natural spaces.
• Grow the state’s economy.

Further, the state’s infrastructure commitment acknowledges that every community deserves to be clean, green, and safe. To achieve this goal, California’s projects have these priorities:

• Benefit disadvantaged communities.
• Engage communities.
• Consult and partner with tribes.
• Create meaningful work and opportunity through jobs and contracts.

Critical state infrastructure

The California Infrastructure Planning Act (Chapter 606, Statutes of 1999) requires the Governor to submit a five-year infrastructure plan to the Legislature for consideration with the annual budget bill. This Chapter, along with other information on the Department of Finance website (www.dof.ca.gov), fulfills the requirements of the Act. The 2024 Five-Year Infrastructure Plan (Plan) focuses on meeting core state responsibilities with limited available resources.

The Plan reflects approximately $53.3 billion in state infrastructure investments over the next five years. In light of the current fiscal outlook, the Plan reflects only the most critical investments in capital assets that support core state functions, including fire and life safety and/or court-ordered projects. To help preserve investments in these critical projects, the Budget proposes to shift spending commitments from the General Fund to other fund sources and to defer several projects to future years.

See the Infrastructure Plan—Proposed Spending figure for a summary of the proposed funding by program area and the Statewide Capital Funding by Department and Fund Source figure for a summary of the proposed funding by year, department, and fund source. Appendix 1, which includes a detailed listing of the specific projects proposed to be funded, can be found on the Department of Finance website.

California Tahoe Conservancy

The California Tahoe Conservancy manages programs to help protect Lake Tahoe’s water quality and conserve wildlife habitat, watershed areas, and public access on the California side of the Lake Tahoe Basin. The Conservancy is a primary implementer of the State of California’s responsibilities under the Environmental Improvement

Program (EIP) for the Lake Tahoe Basin—a 1997 agreement between California, Nevada, the Tahoe Regional Planning Agency, the federal government, local governments, and various private entities. The EIP is updated periodically to include more refined estimates of projects, modifications in the scope of identified projects, and new projects.

The Plan includes $4.1 million ($1.3 million General Obligation bond funds and $2.8 million other funds) over the next five years for one continuing project and multiple studies focused on remediation and restoration of the Lake Tahoe Basin.
Of this amount, the Budget includes $2.3 million ($1.3 million General Obligation bond funds and $1 million other funds) for the Sunset Stables Reach 6: Upper Truckee River Restoration Project, as well as study and planning funds for possible future projects.

Department of Water Resources

The Department of Water Resources (DWR), Division of Flood Management and the Division of Multibenefit Initiatives are committed to a wide and necessary array of flood risk reduction investments such as U.S. Army Corps of Engineers (USACE)-led urban projects, repair of storm-damaged infrastructure, and systemwide multi-benefit projects. DWR has taken a comprehensive look at funding needs over the next five years and beyond, and will continue to work on flood management projects that reduce flood risk and enhance flood system resiliency to address the impacts of climate change, improve operations and maintenance of the flood management system, and improve ecosystem functions.

Much of the existing flood management system in the Central Valley is made up of a complex, integrated system of levees, channel improvements, bypasses, operable and passive weirs, closure structures, pumping plants, and other related flood management facilities. DWR, in partnership with the Central Valley Flood Protection Board (Flood Board), participates with USACE and local entities in the operation, maintenance, repair, rehabilitation, and replacement of these facilities.

The Central Valley Flood Protection Act of 2008 requires DWR to prepare, and the Flood Board to adopt, the Central Valley Flood Protection Plan (Flood Plan). The Flood Plan is California’s strategic blueprint to improve flood risk reduction in the Central Valley. The Flood Plan lays out strategies to:

• Prioritize the state’s investment in flood management over the next three decades.
• Promote multi-benefit projects.
• Integrate and improve ecosystem functions associated with flood risk reduction projects.

The Five-Year Capital Outlay Plan supports DWR flood risk reduction projects that:

• Implement improvements to the State Plan of Flood Control (SPFC) identified in the Flood Plan in coordination with the USACE, Flood Board, and local agencies, and address other known critical deficiencies in the Central Valley flood system.
• Advance flood improvements along the American and Sacramento Rivers and the Yolo Bypass, and locations in the San Joaquin such as Paradise Cut.
• Complete work on five to six urban multi-benefit projects that reduce flood risk, protect habitat, and provide recreation.
• Work with USACE and local agencies to provide financial assistance to complete design and construction of flood risk reduction projects across the state.

The Salton Sea, California’s largest lake, is receding due in part to existing water conservation actions in the Imperial Valley that have reduced inflows to the Sea. Areas of exposed lakebed contribute to harmful dust emissions and reduce important environmental habitat. Along with the California Natural Resources Agency, DWR helps address historic inequities in the region by reducing the contributions of exposed lakebed to poor air quality. The goal is to suppress dust around the Salton Sea by installing aquatic habitat, vegetation, or interim surface roughening.

The Budget includes $54.3 million General Fund in Capital Outlay costs for various flood management system projects in the Central Valley, including $31.3 million for Systemwide Flood Risk Reduction projects and $23 million for the Urban Flood Risk Reduction Program, and an additional $60 million General Fund in Capital Outlay costs for the Salton Sea Management Plan.