The Governor’s January Budget forecasts General Fund revenues will be $29.5 billion lower than at the 2022 Budget Act projections, and California now faces an estimated budget gap of $22.5 billion in Fiscal Year (FY) 2023-24.
Governor Newsom proposes using the bulk of the recent surplus to boost the state’s budget reserves and pay down prior debts and then tying or “triggering” some ongoing programs, including climate programs, to sufficient revenue availability in 2024-25.
In particular, the 2021 and 2022 Budget Acts allocated approximately $54 billion over five years to advance the state’s climate agenda. The proposed Budget maintains approximately $48 billion (89 percent) of these investments. Given the projected decline in General Fund revenues, the Budget includes reductions across several climate programs, which are partially offset by shifts to other fund sources. If there is sufficient General Fund in January 2024, most of these reductions will be restored.
The Governor’s Budget economic forecast does not project a recession. However, the proposed Budget notes that if revenue conditions deteriorate in the spring, then the Administration may proposal withdrawals from reserve accounts, as well as additional program reductions.
Some highlights from the Governor’s January Budget include:
- The Budget maintains $8.6 billion (98 percent) of previously committed funding to minimize the immediate economic and environmental damage from the current drought and support hundreds of local water projects to prepare for and be more resilient to future droughts.
- Delta Levees—$40.6 million General Fund for ongoing Delta projects that reduce risk of levee failure and flooding, provide habitat benefits, and reduce the risk of saltwater intrusion contaminating water supplies.
- Central Valley Flood Protection—$25 million General Fund to support projects that will reduce the risk of flooding for Central Valley communities while contributing to ecosystem restoration and agricultural sustainability.
- 2023 Drought Contingency—$125 million General Fund one-time as a drought contingency set-aside to be allocated as part of the spring budget process, when additional water data will be available to inform future drought needs.
- Modernizing Water Rights—$31.5 million General Fund one-time in 2023-24 to continue development of the Updating Water Rights Data for California Project to enhance California’s water management capabilities.
- Stream Gages—$4.7 million General Fund over two years to begin reactivation of historical stream gages, consistent with the SB 19 Stream Gaging Prioritization Plan and as called for in the Water Supply Strategy.
- Protecting Fish and Wildlife from Changing Climate—A reduction of $35 million General Fund in 2023-24. This maintains approximately $318 million (90 percent) for this purpose.
- Climate Smart Agriculture Programs—A reduction of $8.5 million General Fund in 2021-22 and $85.7 million in 2022-23 across various programs including Healthy Soils Program, Sustainable Cannabis Pilot Program, Pollinator Habitat Program, Conservation Agriculture Planning Grant Program, greenhouse gas reduction research, Invasive Species Council, and Climate Catalyst Fund. This maintains approximately $867 million (90 percent) for climate smart agriculture programs.
Governor Newsom will present a revision of his proposed Budget in May based upon the latest economic forecasts after the majority of residents have filed their state income taxes. The Governor and Legislature will then have until June 15 to approve a final budget.
We will be reviewing these proposals in more detail and actively participating in the legislative budget process to help link this funding to ridgetop to river mouth water management in the Sacramento River Basin and the NCWA priorities. If you have any questions or thoughts on the Budget, please contact me at email@example.com.