ADVOCATING FOR THE INDUSTRY


Overall, the construction industry fares well in the governor’s budget. Most funds available for infrastructure are constitutionally protected or are part of the large infusion of federal dollars.


Closing the Shortfall in California’s 2024-25 Budget


BY FELIPE FUENTES W


ith the Legislature’s return to Sacramento in January, this also starts the state’s


budgetary process with the governor releasing his proposed state 2024-25 budget. This budget proposal was highly anticipated considering that the boom years California experienced the past couple of years have gone by the wayside. Further exacerbating the budget proposal was the delayed tax receipts due to federal and state tax extensions to October, so the state was stuck relying on estimates until late last year. Last year’s state budget had a $97.5 bil- lion surplus. However, Governor Newsom was prudent in spending the surplus with the potential recession on the horizon. Tat budget largely included one-time spending of the surplus funds versus cre- ating new programs or proposing ongoing funding for programs. California largely relies on income tax from capital gains, and stock-based compensation makes the budget beholden to large swings annually. Tis is very evident between last year and this year. In December, the Legislative Analyst’s Office put out an estimate that the state’s deficit is $68 billion. Gov. Newsom, in re- leasing his budget proposal of $291 billion,


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CALIFORNIA CONSTRUCTOR MARCH/APRIL 2024


is more optimistic that the deficit is $37.9 billion. This is quite a stark difference between the two estimates.


Closing The Shortfall Te governor’s cautionary spending in the previous year makes this year’s budget impacts more palatable. Te governor’s budget proposes closing the shortfall through various solutions: Tapping the state’s rainy-day reserve fund for up to $13.1 billion, spending reductions ($8.5 billion), borrowing from special funds ($5.7 billion), delays ($5.1 billion), fund shifts ($3.4 billion) from General Fund to other funds, and deferrals ($2.1 billion). Te governor has made it clear that tax hikes are not on the table, and he will not entertain those as a solution to the state’s deficit issues. Rather, he is looking at how to increase the funds that can go into the state’s rainy-day fund in good revenue years. Overall, the construction industry


fares well in the governor’s budget. Most funds available for infrastructure are constitutionally protected or are part of the large infusion of federal dollars. Te governor continues to highlight the $180 billion investment in infrastructure over the next 10 years, which will help create


400,000 job opportunities. California begins 2024 with $41 billion at work and is prioritizing assisting disadvantaged communities, engaging communities, consulting, and partnering with tribes, and creating meaningful work and opportunity through jobs and contracts. However, even with substantial infrastructure funds, there are still reductions across key sectors impacting construction.


Transportation Funding Impacts Te governor’s proposal would reduce anticipated transportation funding by $200 million impacting the Port of Oakland and the Active Transportation Program. Other delayed funds would not have program- matic impacts and are not a concern for now. Tat being said, there is $15.9 billion proposed in transportation projects. Te largest segments of that funding include high-priority transit and rail infrastructure projects ($7.7 billion), high-speed rail for the Central Valley segment ($4.2 billion), Active Transportation Program and other associated climate adaption projects ($1.4 billion), goods movements for rail and rail and roadways at port terminals ($1.2 billion), zero emission transit capital pro- gram ($1.1 billion), and grade separation projects ($350 million).


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