New State Budget is Crucial for Recovery

by Maria S. Salinas

California Governor Gavin Newsom signed SB 129 on Monday. The legislation reflects the majority of the state budget agreement, a $100 billion investment which capstones the California Comeback Plan. Newsom signed the bill in the El Sereno neighborhood of Los Angeles surrounded by families, small business owners, community, and business leaders. The budget includes many elements crucial for economic recovery. 

The total spending of $262.6 billion in the bill, $196.4 billion of which is from the General Fund, includes top legislative priorities like additional funding for small businesses, investment in infrastructure and climate action, and the allocation of dollars towards workforce development. The homelessness crisis is also a priority for the Governor with $12 billion allocated to help get people into permanent housing, a $6 billion investment into the expansion of our broadband infrastructure, and both free and inclusive pre-kindergarten to all four year-olds beginning in 2022-23.

The Governor also added an additional $1.5 billion in direct grants for small businesses, and created a California Competes Tax Credit grant program to incentivize businesses to relocate to California, helping the state’s economy and working to ensure the small business community can equitably take part in the state’s economic recovery. The recent drought ushered in greater urgency from lawmakers to add additional funding for drought support, and the Governor responded with a $5.1 billion proposal for this emergency.

Although this budget does not address every issue California or its business community faces, it is a positive step toward an equitable economic recovery.

 

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State Budget for 2021-2022 Fiscal Years
Summary Prepared by the Policy Team
As of Wednesday, July 13, 2021

Small Business

The Governor includes historic increases in relief for small businesses in his final budget to provide much needed financial relief for struggling businesses in California. These investments make it the largest relief program in the nation for small businesses. The Governor specifically:

• Provides an additional $1.5 billion in direct grants totaling $4 billion for small businesses with $25M allocated for cultural institutions.
• Allocates $100M to extend the Main Street Small Business Tax Credit.
• Creates a $120M California Competes Tax Credit grant program to incentivize businesses to relocate to the state. 
• $35M to expand the California Dream Fund for seed grants for entrepreneurs and small businesses. 
• $50M to expand the Small Business Loan and Disaster Loan Guarantee programs under IBank.
• Provides $895M for the Small Business Credit Initiative to strengthen support for financing small businesses. 
• $12.5M for the California Rebuilding Fund.
• Expanding team of the California Office of the Small Business Advocate (OSBA.)
• Offer mitigation of SALT Deduction so businesses can recoup some of the tax benefits lost from 2017 SALT.
• Authorizes $6.2B tax cut to those who received Paycheck Protection Program loans. 

Businesses Impact: These investments are greatly needed and will help struggling businesses. The proposals are significant investments in business through financial relief as well as tax credits.

 

Energy, Water, and Environmental Sustainability

The budget focuses on investments in water infrastructure to respond to the drought and improve climate resilience and ensures that every Californian has safe drinking water. The Governor proposes $5.1 billion in drought support, water supply, and natural landscapes over a period of 4 years. Specifically, the Governor:

• Provides $1 billion to provide relief for residents for residents to pay overdue bills.
• Provides $2.6 billion for drinking water and water resupply reliability infrastructure.
• Authorizes $300 million for SGMA implementation to improve water supply.
• Directs $200 million in water conveyance to address the rising cost of moving water.
• Focuses $150 million for ground water clean-up and water recycling.
• Directs $91 million for data collection to better forecast droughts.
• Provides $300 million drought relief through the Urban Water Managements Grants.
• $250M for new Zero Emission Vehicle Infrastructure Grant Program.
• $1.4B for Heavy duty zero emission vehicles and supportive infrastructure.
• $650M for Light Duty Zero Emission Vehicle Adoption and Supportive infrastructure.
• $500M for California Energy Commission (CEC) Clean Transportation program. 
• $250M for ZEV infrastructure and manufacturing supply chain.
• $5M funding to implement the ZEV Market Development Strategy.
• $650M for consumer adoption:
• $250M Clean Cars for All.
• $400M for consumer rebates through the CVRP.
• $100M general fund for green hydrogen production.
• $70M for Healthy Solis Program at California Department of Food and Agriculture.
• $10M for California Farm to School Incubator Grant Program.
• $3.4M technical assistance program for micro-grants to small, mid-sized, and underserved farmers.
• $3M one-time innovative Wood Products to improve forest health.
• $300M to DTSC to accelerate cleanup of contaminated sites.
• $31.4M to DTSC for Exide Cleanup.
• $420M over three years for Transformative Climate Communities.
• $20M over two year for Regional Climate Collaboratives.
• $100M over two years for BUILD to support near-zero emission building technologies and applications.

Business Impact: The Governor’s investments in water infrastructure and drought support are critically needed to allow for a robust economy. The business community supports investments in preserving and managing our water supply because it is vital to life and to business operations.

 

Transportation & Goods Movement

The Governor includes major investments in improving transportation systems and aging transportation infrastructure across California that are so important to maintaining and expanding the state’s movement of goods and people. These allocations and investments include:

• $11 billion to invest in improving roads, high-speed rail, public transportation and advancing the transition to zero emission equipment.
• $2 billion for maintenance projects on state highways and local streets and roads, interregional transportation, and local bridge projects.
• $500 million for active transportation.
• $500 million to create a safer transportation system.
• Allocation of $1 billion toward transportation projects in advance of the 2028 Olympics.
• Authorization of $1 billion in connectivity projects in transit and rail projects.
• $407 million for investments in clean buses and rail equipment and infrastructure.
• Investment of $1.4 billion to purchase clean buses and port drayage trucks.
• $3 billion in funding for transportation infrastructure across the state, including for active transportation projects and projects identified for completion prior to 2028.
• $400 million for a State and Local Transportation Adaptation program.
• Provides a $3.2 billion investment to accelerate California’s zero-emission vehicle goals.
• Makes investments in the electric grid to better resist hotter temperatures.
• Authorizes $900 million for investments in the electric grid to enhance reliability.
• Provides $1.5 billion to invest in the Clean California initiative that will clean up public spaces.
• Invests $2 billion in deferred maintenance for state building and non-transportation infrastructure.
• Directs $2 billion to tackle wildfires and enhance preparedness.

Business Impact: The Governor’s investments in transportation infrastructure are greatly needed to support the aging infrastructure. Transportation systems are vital to offering a broader talent pool, creating jobs, and fostering economic recovery. The business community welcomes these investments The Governor makes historic investments in infrastructure to address the state’s aging electric grid and combat wildfires in the state. These historic investments are critical in order to manage wildfires and the demand on electricity.

 

Land Use, Construction, and Housing

The Governor’s Plan will invest $12 billion to tackle the homelessness crisis, helping more than 65,000 people get off the streets or avoid homelessness altogether. The Plan reaches the most vulnerable by rebuilding the behavioral health housing system that has been dismantled over decades. It also comes with new accountability measures to ensure local governments are spending the money effectively. The plan includes:

• A $3.5 billion investment in homeless prevention, rental support through. CalWORKs, and new housing opportunities for people at risk of homelessness.
• 42,000 new homeless housing units – the biggest increase in California history.
• Targeted programs and grants to local governments to move people out of unsafe, unhealthy encampments and into safer, more stable housing.
• To clean California’s streets, the Governor’s budget includes $1.1B to partner with local governments to clean litter, commission public art, and revitalize downtowns, freeways, and neighborhoods across California. This program is expected to create close to 11,000 jobs over three years.
• $3.5 billion into building more affordable housing for low-income families and creating homeownership opportunities to help restore the California Dream.

Business Impact: The Governor investments in housing and homelessness will go a long way in ensuring that California residents have access to affordable housing.

 

Innovation and Technology

The administration’s budget allocates up to $6 billion (federal and state funds) over two multiple years to fund state broadband infrastructure projects and programs. The package deal includes $3.75 billion for middle-mile infrastructure in unserved communities.     

• Provide $3.75 billion for open access middle-mile broadband networks.
• Allocate $2 billion for last-mile broadband projects Last-Mile Broadband 
• Allocate $500 million for loan loss reserve account to help secure financing  for locally owned broadband infrastructure projects sponsored by counties.
• $500 million to support broadband improvements for telecommunications companies that participate in CPUC’s California High Cost Fund a Program. 

Business Impact: Broadband access continues to be a critical infrastructure issue for those who are underserved. The Chamber will work with the Governor’s office and legislators to ensure broadband access will be available for all Californians.

     

Education and Workforce Development

Under the Governor’s Plan, public schools in low-income neighborhoods can fundamentally transform into the complete campus every parent wants for their child – with before-school and after-school instruction, sports and arts, personalized tutoring, nurses, and counselors and nutrition – paired with new preventative behavioral health services for every child in California. Additionally, The Governor’s budget provides funding to build the workforce across industries from healthcare to youth employment opportunities and jobs to combat climate change. 

• Universal preschool, providing high-quality, free transitional kindergarten to all four-year-olds in California.
• The California Comeback Plan also adds 200,000 child care slots to support caregivers.
• It also creates child savings accounts for 3.7 million low-income children in public school for higher education or to start their own business, making college more attainable than ever before.
• The Governor’s Plan will make college more affordable and accessible by driving down the cost of attendance. This will include cutting the cost of student housing and working to reduce the cost of textbooks.
• $2 billion one-time Proposition 98 General Fund to fund health and safety activities, including testing and vaccine initiatives, enhanced cleaning, personal protective equipment, and improved ventilation at schools.
• $50M to the Employment Training Panel to support training opportunities for businesses.
• $200M to fund career pathways for In Home Supportive Services providers - healthcare industry.
• $115M for High Road Training Partnership for up-skilling workforce.
• $10M for work-based learning opportunities - cloud computing, ZEV, and supply chain fields.
• $1B in ARPA funds to CSAC establish one-time grant programs for displaced workers seeking reskilling.
• $4.7M for California Climate Action Corps Programs to support service opportunities in addressing climate.
• $25M to build a new CSU Northridge STEM Center.
• $15M convert UCLA Downtown Labor Center to James Lawson Labor Justice Center.
• $1B for Endowment for Learning-Aligned Employment to help students with financial need gain work experience.
• $200M to cities and counties to support youth employment opportunities.

Business Impact: Investments in our education system is critical to building the school to work pipeline. The foundation set in the Governor’s plan is equally crucial to ensure our students are set up for success from the second they enter school. It is critical that the state continues to expand on workforce development, help displaced workers regain skills, and find new opportunities to engage youth in the workforce. This investment in the workforce will be vital to the strength of the state’s economy.  

 

Health Care

The Health and Human Services Agency oversees departments and state entities that provide health and social services to the most vulnerable and at-risk Californians. It is leading the response to the COVID-19 Pandemic along with the Governor’s Office of Emergency Services. The budget includes $207.7 billion ($54.2 billion General Fund and $153.5 billion other funds) for all health and human services programs. The budget includes:

• $1.08 billion for COVID-19 response costs. These funds will support testing and laboratory operations, vaccination, medical surge capacity, contact tracing management, and other state operational needs.
• $3 million for an assessment of the state’s public health and emergency response to the pandemic.
• $100 million over the next five years to support youth behavioral health education and outreach programs as a part of the Children and Youth Behavioral Health Initiative proposal.

Business Impact: Making sure that COVID-19 and any developing variants is stopped is critical to ensuring that our businesses can stay open. The plan makes sure that we continue to educate and vaccinate people. The faster we reach herd immunity, the better.

 

Cannabis

The Governor’s budget includes over $250 million in funding to establish grants and a regulatory agency for cannabis businesses:

• $100M in one time funding to establish a local assistance grant program for cannabis.
• $158M to consolidate cannabis licensing and regulatory functions under a new stand-alone department. 

Business Impact: The establishment of a department to streamline licensing and regulatory functions will ensure direct services are provided to cannabis businesses.