Flush With Cash, Governor Newsom Wants to Invest in Pandemic Response, Universal Health Access, Fighting Inequality

With California expecting another year of record state revenues, Gov. Gavin Newsom on Monday unveiled a spending plan that would make deep investments into containing the current COVID-19 surge, expanding health care access, shoring up drought response and fighting organized retail crime.

The $286.4 billion proposal is aimed at tackling what Newsom’s administration deems California’s “most existential threats”: COVID-19, climate change, homelessness, inequality and public safety. With midterm elections and the governor’s reelection campaign looming this fall, however, those challenges also pose clear political threats to the national Democratic establishment.

His budget seems aimed at getting ahead of some of that. Newsom is asking lawmakers to spend an extra $1.4 billion immediately on pandemic response measures — a proposal that comes as the state faces down its third year of addressing the pandemic even as COVID-19 cases surge to record levels, causing major disruptions in schools and hospitals.

The governor wants the state to earmark $2.7 billion in additional money over the next 18 months for increased testing, vaccination campaigns and support for hospitals and health care workers.

“The goal this year is to do more in testing and those vaccine boosters,” he said. “[We] continue to do what we can to fight this latest surge, in issues related to staffing of frontline workers in our hospitals, and dealing with this incredible stress and strain that so many in our system are facing.”

Newsom also praised “the individuals that show up every single day for work against just extraordinary, extraordinary circumstances.”

With at least $45 billion more in expected revenue than had been forecast by state officials last year — a number that could climb even higher over the coming months — Newsom also wants to expand health care access to all Californians, regardless of immigration status. If his proposal to make Medi-Cal available to all undocumented immigrants is approved, California would become the first state in the nation to do so.

Not all of that $45 billion in extra money is unspoken for. Newsom noted that $16 billion of it will automatically go to schools, and $9 billion will be put in state reserves or used to pay down debt.

In all, California leaders will have about $20 billion extra to spend — cash Newsom said he wants to spend largely on one-time investments. It's still unclear, the governor said, whether the state will have to refund any money to taxpayers under a 1979 law that places limits on state spending.

Schools and COVID-19

With the pandemic still top of mind for many Californians, Newsom is including a proposed $1.2 billion to help expand hours and capacity at testing sites as well as distribute millions of antigen tests to schools, local governments and clinics. The lack of access to testing has become a huge problem for schools in particular as the omicron variant drives cases to unprecedented levels, prompting staffing shortages and posing political challenges for Newsom and other state leaders.

In addition to testing, the governor wants to pump another $583 million into efforts to get more Californians vaccinated and boosted. That money would fund not only in-home vaccination and testing programs and free transportation to vaccine appointments, but also a public education campaign aimed at combating vaccine misinformation.

The governor also wants to invest billions more into behavioral health services — including for young people who have been hit hard by mental health issues during the pandemic. And, he’s proposing to continue offering two free meals a day to all public schoolchildren, not just those from families with incomes deemed low enough to qualify.

And, to address concerns about how declining public school enrollment could hurt schools already struggling to survive the pandemic, Newsom is proposing a new way to calculate how much money school districts receive. Instead of basing budget figures on a district’s average daily attendance over one school year, the budget proposes allowing them to consider an average of three years of attendance figures.

Climate investments

Despite wet weather in recent weeks, California is still facing a historic drought. Last year, lawmakers and the governor approved a $5.2 billion water package that will fund infrastructure projects around the state to make water more reliable and safer. In this year’s plan, Newsom proposes spending an additional $750 million to help residents, farmers and wildlife.

“We are mindful of our need to do better to prepare not only for short-term, medium- and long-term realities of a world that's being replumbed both literally and figuratively as it comes to weather,” Newsom said, adding that in addition to investments in storage and infrastructure, “we have got to do more, all of us including my family, on water conservation.”

The governor is also including $1.2 billion in new spending on initiatives like forest thinning, prescribed burns, grazing, reforestation, fuel breaks and new technology to detect wildfires early. And he wants to direct nearly $650 million in new funds to support firefighting efforts — including $400 million for CalFire firefighters directly.

“They are overwhelmed, they are stressed,” Newsom said of the CalFire workforce. “We have gotten staffing up [in recent years] but the workload is still profound.”

Newsom wants to reduce the state’s reliance on fossil fuels in part by investing a total of $10 billion to encourage the switch to electric vehicles, including nearly $4 billion for trucks, buses and heavy-duty vehicles. And he’s proposing over $1 billion over the next three years in new tax credits for businesses that create “cutting-edge climate solutions” and “develop green energy technologies and agree to share profits.”

Targeting inequality

The governor also is prioritizing the state’s high cost of living, saying he wants to help blunt the rising costs of health care, housing and child care — and help small businesses stay open.

Among his initiatives:

• Expanding Medi-Cal health coverage to undocumented immigrants who are between age 26 and 50. In recent years, the state has slowly increased access to the health care insurance program for Californians with lower incomes — first by expanding it to young people up to age 26 in 2019, and then last year by including an estimated 235,000 undocumented people over the age of 50. Under this year’s proposal — which is likely to be embraced by the Democrat-led Legislature, another 764,000 people would be covered by January of 2024.
• Investing in child care and education programs by adding thousands of new child care slots for lower-income families and increasing access to before-, after- and summer-school programs. He’s also proposing $4 billion in spending over the next several years to create universal preschool in California.
• Earmarking $2 billion for grants and tax credits aimed at increasing housing production in California.
• Providing hundreds of millions of dollars in grants and tax breaks to small businesses as well as waiving fees. Newsom, a business owner himself, noted the challenges small businesses have faced during this pandemic.
• $182 million to fight the opioid epidemic, particularly the fentanyl crisis, including for overdose prevention and medication-assisted treatment.

And, the governor said the state will be experimenting with a way to bring down the cost of prescription drugs by entering into agreements to produce its own insulin.

“Insulin epitomizes the failures in the pharmaceutical industry,” he said, adding that more details will be released in the coming months but that he hopes the pilot program could be a model for other pharmaceutical products.

Reducing homelessness

In addition to $12 billion authorized last year, Newsom is proposing another $2 billion in spending this year aimed at getting people off the street and into shelters that have behavioral health support. He noted that the state has housed more than 50,000 people since the pandemic began, through its Project Roomkey program, but said more needs to be done.

Most strikingly, the governor indicated he intends to double down on one of the state’s most controversial strategies for getting people into housing: conservatorship laws, which allow counties to force residents deemed mentally incompetent by a court into treatment.

Conservatorship laws have been vociferously opposed by some advocates for unhoused people and by civil libertarians, but the governor promised to overhaul the state’s laws this year, with more details in the coming weeks for what is sure to be a controversial proposal.

“Look, we recognize our responsibility to do more and better,” he said.

Among his budget proposals: $1.4 billion for mobile crisis services, so that Medi-Cal providers can provide behavioral health care to unhoused residents where they are.

Public safety

Newsom also is trying to get ahead of concerns about public safety. His proposal includes $255 million in grants to help local law enforcement combat organized retail crime — including by increasing police presence at stores. He’s piloting a new grant program to help small businesses that have been the victims of smash-and-grab theft.

Newsom also wants to make permanent a “smash and grab” division at the California Highway Patrol dedicated to assisting police agencies in the Bay Area, Sacramento, San Joaquin Valley, Los Angeles and San Diego regions combat retail, auto and rail theft.

The budget also calls for nearly $50 million to help both state and local prosecutors in theft-related cases — including to prosecute large retail theft rings.

Newsom said he understands that mayors and local police and prosecutors need support to tackle, in particular, organized theft.

“It’s wrong and you have to be held to account,” he said, noting that those crimes threaten “our sense of safety,” which he called “foundational to any thriving society.”