Newsom Announces Budget Proposal Which Includes $6 Billion in Cuts to Environmental/Climate Change Programs

Nossaman eAlert

On January 10, 2023, Governor Gavin Newsom announced his 2023-2024 budget proposal, totaling $297 billion and leading to a $22.5 billion budget deficit. This deficit represents a significant change from last year’s nearly $100 billion budget surplus and is largely due to inflation and dips in the stock market.

Governor Newsom chose not rely on the state’s $35.6 billion in budgetary reserves, which include $22.4 billion for budget stabilization, stating he is taking “a wait-and-see approach to this budget.” Instead, the budget addresses the deficit through:

  • Funding delays ($7.4 billion);
  • Reductions/pullbacks ($5.7 billion);
  • “Fund shifts” (changing the funding source for some projects from the General Fund to other funding sources) ($4.3 billion);
  • “Trigger reductions” (reductions that will be reversed if funds become available) ($3.9 billion); and
  • Limited revenue generation and borrowing ($1.2 billion).

The budget also includes “resiliency measures” designed to address projected deficits in future years.

Environmental/climate change programs are one of the areas most impacted by the projected deficit. Governor Newsom’s budget proposes to cut $6 billion (~27% of the total cuts) from its climate change agenda, lowering the funding 11% from $54 billion in 2022-2023 to $48 billion in 2023-2024. The budget notes that it will prioritize equity and priority populations (those facing disproportionate harm) with the funding it does provide. “Most” of the reductions are trigger reductions, meaning that if the state ends up having more money than it projects, the funding will be provided to the programs at issue. Further, approximately $1.7 billion of the budget’s fund shifts involve changing the funding source for climate programs to the Greenhouse Gas Reduction Fund, largely for zero-emission vehicle-related funding.

The climate change section of the budget summary (pages 39-56) details the funding the proposal provides as well as which areas are getting cut and by how much, including:

  • Zero-emission vehicle investments will be cut by 11% to $8.9 billion;
  • Transportation will be reduced by 16% to $11.6 billion, including a reduction from $7.7 billion to $5.7 billion for local transit capital infrastructure projects;
  • Energy will be reduced by 11% to $7 billion, including a $25 million (10%) cut in the Carbon Removal Program at the California Energy Commission;
  • Wildfire and forest resilience will be reduced by 3% to $2.7 billion;
  • Drought response and water resilience will be lowered by 2% to $8.6 billion;
  • Coastal resilience will be reduced by 43% to $734 million, including a 45% reduction in coastal protection and adaption funding to $582 million; and
  • An 11% cut to sustainable agriculture investments.

Despite the cuts to so many programs, Governor Newsom’s budget does still provide significant funding to address a variety of areas, and the fact that a number of the core cuts qualify as trigger reductions leaves open the possibility that those projects will be fully funded.

One of the environmental areas that receives a number of new investments is drought response and water resilience (pages 48-51), which, at 2%, receives the lowest percentage cut of any of the environmental/climate change areas. Governor Newsom’s budget notes that the past three years (2020-2022) comprised the driest three-year period on record going back to 1896. It also warns that while the recent storms help the drought, they alone do not solve the issue and instead the state needs sustained precipitation. It references Governor Newsom’s “California's Water Supply Strategy, Adapting to a Hotter, Drier Future,” which was released in August 2022 and provides his administration’s approach to dealing with the state’s water strategy going forward. This new budget is Newsom’s first to begin implementing the steps laid out in that strategy. To that end, the budget includes a number of new investments including $135.5 million in urban flood risk reduction, $31.5 million for modernizing water rights, and $7 million to implement the urban water use objectives from 2022’s Senate Bill 1157. Despite those new programs, the drought response and water resilience also includes a number of cuts, including a 35% reduction in funding for per- and polyfluoroalkyl substance (PFAS) cleanup and a 5% reduction in funding for water resilience programs.

This proposed budget from Governor Newsom is the first stage in the process and represents a starting point for negotiations with the Legislature. The Governor will next submit a revision to his proposal in May. The Legislature is required to pass a budget by June 15, which would take effect starting on July 1, the start of the next fiscal year.

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