)(Budget Highlights
June 15 was the constitutional deadline for the Legislature to pass a budget and send it to the Governor. The Legislature’s budget largely rejects the Governor’s proposed cuts from the May Revision budget and instead relies on federal assistance, accounting maneuvers, and additional reserves.
The Legislature acknowledged additional work on the budget is needed, which will be carried out in the coming days and weeks. Numerous budget trailers bills will be considered to implement the budget or make cuts to existing programs if federal assistance is not forthcoming.
Negotiations between the Governor and Legislature on additional budgetary items continue this week. It is anticipated that an August revision to the budget will occur once tax receipts are received in July. The League will continue to fight for resources that cities need to address revenue loss related to the COVID-19 pandemic response and recovery.
Read League Executive Director Carolyn Coleman’s response to the FY 2020-21 State Budget here, and read below for highlights that are of interest to cities:
Trigger Cuts
If California does not receive the anticipated $14 billion in additional federal assistance by Sept. 1, the following “trigger solutions” may occur:
• $2.7 billion more from the rainy day fund and Safety Net Reserve.
• $1.3 billion one-time benefit from reinstatement of a longstanding deferral of state payments to CalPERS, including from state special funds.
• $5.9 billion of increased deferrals to Proposition 98 (K-14 education) funding.
• $600 million reduction to the county realignment backfill in this budget plan (leaving $400 million of county backfill remaining).
• $770 million of university reductions ($370 million for University of California and $400 million for California State University systems).
• $100 million of reductions to the judicial branch budget.
• At least $1.5 billion in state employee compensation reductions to be achieved, for represented employees, through the collective bargaining process.
• Potentially another $1.6 billion from reinstatement of the one-day June payroll deferral that was instituted during the last recession (this change would be optional at the direction of the Director of the Department of Finance).
CARES Act Funding
The Legislature’s budget allocates $500 million to cities for homelessness, public health, public safety, and other services to combat COVID-19 pandemic as follows:
• $225 million directly to cities with a population greater than 300,000 that did not receive a direct allocation from the Federal CARES Act. Allocation based on the city’s population.
• $275 million to cities with a population less than 300,000. Allocation based on the city’s population. No city shall receive less than $50,000.
The Legislature’s budget allocates $550 million through the Department of Housing and Community Development for acquisition or acquisition and rehabilitation of motels, hotels, or hostels; master leasing of properties; acquisition of other sites and assets; conversion of units from nonresidential to residential in a structure with a certificate of occupancy as a motel, hotel, or hostel; purchase of affordability covenants and restrictions for units; and the relocation costs for individuals who are being displaced as a result of rehabilitation of existing units. The budget also adopts a placeholder trailer bill to implement Project Roomkey.
Homelessness Funding
The Legislature’s budget includes additional funding to support existing homelessness programs. The budget directs $350 million to the Homeless Coordinating and Financing Council, however, it is unclear how these funds will be allocated. A budget trailer bill is likely needed to provide direction to the Homeless Coordinating and Financing Council.
Transportation Funding
The Legislature’s budget rejects the Governor’s May Revision proposal to transfer $130.5 million in interest earnings from the State Highway Account (SHA) to the General Fund.
Broadband
The Legislature will adopt budget trailer bill language to better enable telecommunications providers to compete for federal funding with the intent of improving access to broadband Internet in California.
California Office of Emergency Services
The Legislature’s budget allocates $50 million one-time General Fund for Community Power Resiliency to support additional preparedness measures that bolster community resiliency and includes budget bill language reflecting the Legislature’s priorities in this area.
The Legislature’s budget allocates $2 million General Fund for the Wildfire Forecast and Threat Intelligence Integration Center, consistent with Chapter 405, Statutes of 2019 (SB 209), reducing the proposal by $6.8 million General Fund across various departments.
Department of Parks and Recreation
The Legislature’s budget rejects the $30 million General Fund ongoing baseline cut to the Department of Parks and Recreation scheduled to begin 2021-22.
Department of Water Resources
The Legislature’s budget approves $18 million General Fund and $10 million Proposition 68 for the New River Project.
The Legislature’s budget approves the withdrawal of $35 million General Fund for the Tijuana River Project.
Minor Revenue Increases
The Legislature will adopt budget trailer bill language for used car dealer sales tax. This trailer bill language would require used car dealers to remit the sales tax from a vehicle sale to the Department of Motor Vehicles with the registration fee. This change is projected to increase by millions state and local revenues from these transactions.
-League of California Cities
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