ADVOCATING FOR THE INDUSTRY
UNLESS THERE IS A STEEP DOWNTURN, the California governor and legislature will not likely have to propose the kind of deep reductions to priority programs that marked the budget shortfalls over the past two decades.
California Faces Budget Headwinds in 2023
BY FELIPE FUENTES
ccording to the California gover- nor’s budget proposal, California is facing an estimated budget gap of $22.5 billion for the 2023-24 fiscal year. As is the case in every budget year, this gap and the budget to be passed by the Legislature on June 15, 2023 will change as the state’s economic outlook becomes clearer closer to the end of the fiscal year. Fortunately, through prudent plan- ning and budget resilience built into budgets by previous legislatures, the state is in its best fiscal position to address an economic slowdown or recession. Tese previous actions have included the use of recent budget surpluses to boost the state’s reserves and pay down prior debts. New appropriations have employed “trig- gering” cuts to new ongoing programs should there be insufficient revenue availability in future years. Unless there is a steep downturn, the
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governor and legislature will not likely have to propose the kind of deep reductions to priority programs that marked the budget shortfalls over the past two decades. It will, however, require the state to delay or forego some spending in the near term. Some of the specific details include:
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CALIFORNIA CONSTRUCTOR MARCH/APRIL 2023
• Funding Delays—$7.4 billion. The governor’s proposed budget delays fund- ing for multiple items across the 2021-22 through 2023-24 fiscal years and spreads it across the multi-year period without reducing the total amount of funding. • Reductions/Pullbacks—$5.7 billion. Proposed reductions include appropri- ations made in the 2022 Budget Act to provide additional budget resilience. Significant items in this category include the $3 billion included in the 2022 bud- get as an inflationary adjustment, and a $750 million Unemployment Trust Fund payment in the 2023-24 fiscal year. • Fund Shifts—$4.3 billion. Te budget shifts certain expenditures in the 2022-23 and 2023-24 fiscal years from the General Fund to other funds. Tese include (1) shifting various California State Univer- sity (CSU) capital outlay projects to CSU issued debt with the state providing sup- port for the underlying debt service, (2) reverting certain bonds to cash projects from the 2022 Budget Act back to bonds, and (3) shifting certain Zero Emission Vehicle commitments to the Greenhouse Gas Reduction Fund. • Trigger Reductions—$3.9 billion. Te
budget reduces funding for certain items in the 2020-21 through 2023-24 fiscal years and places them in a “trigger” that would restore the reductions at the 2024 governor’s budget if it is determined that sufficient funds will be available to cover certain commitments. Tese commitments include: baseline adjustments, enrollment, caseload, and population adjustments, constitutional obligations, as well as the cost of funding all of the items included in the trigger. Tese items are primarily in the areas of climate and transportation.
TRANSPORTATION & CLIMATE REDUCTIONS The 2022 Budget Act included $13.8 billion for transportation programs and projects that align with the state’s climate goals. Given the anticipated deficit, the governor’s proposal includes $2.7 billion in General Fund reductions, partially mitigated by an additional $500 million from state transportation funds, to main- tain $11.6 billion (84%) of these climate investments. Te governor’s hope is that this level of investment will continue to position the state to continue pursuing significant federal funding through the
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