GOVERNMENT RELATIONS COVID-19 Infects State Budget


Spending Priorities Will Focus on Pandemic Response, Essential State Services By Felipe Fuentes, AGC Legislative Advocate


new worldwide health emergency beginning in January 2019, COVID-19 got its official name from the World Health Organization (WHO) on February 11, 2020. In less than three months, the coronavirus spread to more than 160 countries and regions around the world. Recognized as a global pandemic


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by the WHO on March 11, COVID-19 was declared a national emergency on March 13. As a result, California’s Legislature quickly convened on March 16 and passed emergency funding authorizing $1.1 billion dollars for the Governor to exercise in fighting the epidemic. Te Legislature immediately recessed its session after this budget vote in its efforts to “flatten the curve” of infection in the capitol.


Booming Economy Before COVID-19


California, like much of the country,


was enjoying healthy budgetary predic- tions and record low unemployment prior to the COVID-19 crisis. With an anticipated $222 billion-dollar 2020-21 state budget, it seemed inconceivable that California would enter a steep decline, let alone a recession. Te appropriate stay at home order


given by the State Public Health Director and Gov. Newsom was


www.AGC-CA.org


ith reports of a


intended to slow the spread of the virus. Predictably, the limitations set on non-essential businesses – closing of restaurants, movie theaters and the like – resulted in a tremendous consumer spending freeze and job loss. In fact, the week following the order the state began to average 106,000 unemployment insurance claims per day where it previously only averaged 2,500 claims a day. Suffice it to say, it is difficult to


predict when California will fully recover from the health and economic effects of COVID-19. Te Legislature’s session and policy


Suffice it to say, it is difficult to predict when California will fully recover from the health and economic effects of COVID-19.


agenda has been rapidly shortened to deal with the crisis at hand. In a typical year, the Governor through his Department of Finance would submit a revision to his January budget proposal for deliberation by the Legislature in May. Tis “May revise” of the budget is reconciled against the actual receipt of revenues by the state from income, sales and property taxes.


Limited Spending Priorities With the allowed deferral by the


federal and state government for some


of these tax payments, the revenue projections for the year have been drastically reduced. Tis certainly will result in the Legislature having to limit its spending priorities to COVID-19 response and essential state operations. Te California constitution requires


that a budget be passed and enacted by the Governor on July 1. While the COVID-19 crisis has disrupted the Legislature’s normal schedule, it is anticipated that a short legislative session may be held. Normally, the second year of the legislative session would come to a close at the end of August. Barring a call for a special session


by the Governor, the Legislature could forego its normal summer recess and reconvene during the summer. In any case, it is expected that only priority legislation will be considered this year. COVID-19 response, housing production, homeless issues, and wildfire mitigation legislation are the likeliest topics that will be the focus of the Legislature in what is sure to be a truncated 2020 session.


Focus on Aiding Businesses, Residents


Additionally, the Legislature will


need to focus on its role in aiding California business and residents in the economic recovery of the state. Having done all it can to slow the


rate of transmission and prepare for the healthcare of those infected, the Governor and Legislature’s next task will be to jumpstart the state economy. Be it tax credits, no/low interest


loans, or regulatory relief, California’s elected officials will have to be creative in order to match the speed by which COVID-19 devastated our economy. 


Associated General Contractors of California 5


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