Newsom Proposes $144 Billion California Budget With Focus On Education, Building Reserves

Updated 4:56 p.m.

California’s booming economy and fiscal health have offered Gov. Gavin Newsom a rare opportunity: to propose a state budget with something for nearly everyone.

Newsom on Thursday proposed a $144 billion general fund spending plan in his first budget, a 4 percent increase.

It follows former Gov. Jerry Brown’s pattern of socking away billions of dollars in reserves while making  large investments in early childhood development, K-12 and higher education, health care and emergency readiness.

Listen to reporter Sammy Caiola explaining some of the health care measures included in Newsom's budget proposal here:

"This is the good times," Newsom said Thursday. "But the key in a progressive tax system with the volatility that we experience — that needs to be addressed, but will not be a short-term endeavor — is to stack away as much money as you can and pay down as much debt as you can."

Watch Gov. Gavin Newsom's press conference announcing the budget

Overall, the budget projects a $21.4 billion surplus, $6.5 billion larger than the Legislative Analyst's Office November projection. Newsom said that was largely because he's projecting more modest growth in Medi-Cal costs.

Included is $13.6 billion for what he calls “budgetary resiliency,” including building reserves, paying down debt and reducing pension liabilities

Part of that would be an extra $3 billion contribution to CalSTRS — the state teachers’ retirement system — on behalf of school districts. That’s in addition to the state’s own contribution to the fund.

“We’re really encouraged by what the governor said about that, about helping us out, because it was encroaching on our general fund, " said Dr. Emma Turner president of the California School Boards Association. "And that just takes away from what kids need in order to learn.”

Newsom’s budget pegs the total unfunded liability for teachers’ pensions at $103.5 billion. Liability for the funds is split three ways among the state, districts and teachers.

Newsom’s budget would spend $80.7 billion on K-12 schools and community colleges. For higher education, Newsom proposed nearly $500 million more in ongoing funds for the UC and CSU systems, plus additional one-time funding for deferred maintenance and other initiatives.

The spending plan also includes $500 million in one-time money for “building child care infrastructure, including investing in the education of the child care workforce,” according the a news release from the governor’s office. It’s part of Newsom’s plan to achieve universal preschool for all children in California.

As many expected, the budget increased spending for health care, including $260 million to expand Medi-Cal coverage to young adults, ages 19-25, living in the state illegally.  The governor plans to increase subsidies to make Covered California more affordable for lower and middle-class enrollees.

He says he’ll fund the expansion with a statewide individual mandate, to replace the federal version the Trump administration eliminated.

"With all due respect to the President of the United States, he's wrong. California is right," Newsom said.

Critics of coverage expansion have pointed out the shortage of providers taking Medi-Cal due to low reimbursement rates. Newsom’s proposal includes $3.2 billion for rate increases for doctors, dentists, home health workers and more.  It also puts $50 million toward programs that aim to grow the mental health workforce. An additional $24.9 million will fund more staff in hospitals.

The budget adds $1.3 billion to increase housing production, including funds for local governments to incentivize construction.

"We're not playing small ball on housing," Newsom said. "It's more money, but it's performance based."

He said that regional housing goals could be enforced by the Department of Housing and Community Development, which could lead to a loss of transportation funding for areas that don't meet the targets.

"To me, transportation is housing, housing is transportation," Newsom said. "If you're not hitting your goals, I don't know why you get your money. But we're going to phase it in to give people some time."

Democratic Assemblyman Phil Ting,  the chair of the budget committee, said he was thrilled with Newsom’s calls to invest in health care and early childhood education. But he cautioned that some of the governor’s fee increases — and the creation of an individual mandate for health insurance — will be hard for even some Democrats to support.

“We have to make sure they understand how difficult and challenging these votes are," Ting said. "So you can only ask legislators to take so many tough votes on these fiscal issues.”

The top Republican on the Assembly budget committee, Jay Obernolte, praised Newsom’s proposals to pay down pension debt and increase funding for early childhood education.

"That’s a bipartisan issue, as you know," he said. "And I think a lot of us in the Legislature were really looking forward to that.”

But he’s worried about the proposed Medi-Cal expansion to undocumented young adults, arguing there aren’t enough doctors to treat Californians already on Medi-Cal.

Altogether, including bonds and other funds the total budget is $209 billion. Lawmakers must approve a final budget  by June 15.