Newsom Wants To Make Big Moves On Housing, Education And Health Care — Without Spending Too Much

California Gov. Gavin Newsom presents his first state budget during a news conference Thursday, Jan. 10, 2019, in Sacramento, Calif. (Photo by Rich Pedroncelli/AP)

California Gov. Gavin Newsom on Thursday laid out a sweeping $209 billion budget plan that seeks to signal a new wave of state leadership, making large investments in housing, education, debt payments, and wildfire firefighting and recovery efforts.

The governor's 2019-2020 spending plan marks a 4 percent increase in general plan spending, which he argued is not out of line with his predecessor, Jerry Brown, who was well-known for his fiscal constraint. But he also projected a $21.4 billion surplus, somewhat more than projected in November by legislative analysts.

Newsom and his team pointed out that over 86 percent of the new spending outlined in his budget will be one-time costs. And he allocated billions toward building the state's reserves and paying down debt, including $4.8 billion for unfunded retirement liabilities.

Acknowledging that the state is overdue for an economic correction, Newsom said this budget anticipates a 3.2 percent growth rate, lower than past years that hovered around 5 percent.

"We are preparing for uncertain times, and we are paying down debt in historic ways," Newsom said, spending nearly 50 minutes behind a lectern in Sacramento describing his first budget before turning to questions from reporters.

Projects like full-day kindergarten, spurring housing development and upgrades to the 911 system, would benefit from one-time spending allocations outlined by Newsom.

The state Legislature will review the governor's budget proposal over the coming months. Lawmakers will need to approve a spending plan by June 15.

For a full analysis of what's in the budget, our reporters broke it down by subject:

HEALTH CARE

Expand Medi-Cal

The number of Californians without health insurance has fallen under the Affordable Care Act from 17 percent of the population in 2013 to 7 percent in 2017. The largest group of uninsured are people in the country illegally.

Newsom wants to expand Medi-Cal eligibility to young adults who qualify up to age 26, regardless of their immigration status. California already does this up to age 19. The governor's budget asks the legislature to approve $260 million a year to do this.

Critics say the state shouldn't provide free or subsidized health insurance to people in the U.S. illegally, but with Democrats holding a supermajority in both houses of the state legislature and a governor actively pushing the idea, this proposal would seem to stand a good chance of becoming reality.

Newsom considers this Medi-Cal expansion a first step. On the campaign trail, he supported covering all Californians who qualify for Medi-Cal regardless of their age or immigration status. If that happens, it could cost $3 billion a year.

Creating an individual mandate for California

Newsom wants to require everyone in the state to have health insurance, and to be subject to a fine if they don't. If the legislature buys into the idea, it would reinstate the defunct Obamacare mandate, but only for California. Congress killed the fines associated with that requirement when it passed the federal tax overhaul in 2017.

There are about 3 million Californians who don't have health insurance. Analysts have estimated the loss of the federal mandate could make that number grow to 4 million.

New help paying the monthly premium

Newsom says money the state collects in fines from Californians who don't have health insurance would go to help more people pay for their monthly premiums. Right now, nine in 10 people who buy insurance on Covered California receive federal subsidies. The governor wants to provide state subsidies for middle-class people who make too much to qualify for that help from the feds.

Federal subsidies help individuals who make up to $48,000 a year and families of four who make up to $98,000 a year. If the legislature approves the governor's proposal, the state will raise those ceilings to $73,000 for individuals and $150,000 for a family of four.

Last year lawmakers unsuccessfully asked for $500 million to cover state subsidies for people at those higher income levels. Newsom projects that's about how much the fines generated by an individual mandate would generate each year.

Dr. Geoffrey Joyce is a health economist and the director of Health Policy at the USC Schaeffer Center. He says this move could go far to help consumers in the state. Still, he warns about spending.

"[Newsom's] basically inheriting a nice budget surplus from Jerry Brown, but we all know how quickly California's budget surpluses and deficits can change," said Joyce. "He should not be overly ambitious and basically spend so [much] that once the next recession hits we're in big, big trouble."

Newsom's budget proposals are part of a larger package of steps he's taking that his office describes as an effort "to move California closer to the goal of health care for all." While Newsome supports a radical transformation of the state's health care system to a government-run single-payer model, that's going to be easier said than done.

— Contributed by Michelle Faust Raghavan

EARLY EDUCATION

Investing in the early years

In his first budget proposal, Newsom has delivered on his campaign promises to prioritize early childhood care and education. The proposal allocates nearly $2 billion on a wide range of programs for children ages 0-5. Here's a quick rundown:

  • $750 million is set aside to extend half-day kindergarten classes to full-day to accommodate working parents.
  • $500 million would go toward training providers and expanding facilities in state-subsidized child care programs.
  • There would be funding to expand preschool to all 4-year-olds from low-income families over a three-year period, starting with a nearly $125 million investment.
  • $60 million is earmarked for increased developmental screenings to assess educational, social, and emotional development for infants and toddlers.
  • $23 million is designated for home visiting programs for low-income, new mothers.
  • $7.5 million is allotted to increase participation in the Black Infant Health program, which aims to reduce the high rates of black infant mortality.

Newsom has also proposed giving families six months of paid family leave after the birth of a child. That would be the longest parental leave in the nation. It's still not clear how the state will pay for it. The proposal says that during the next year the administration will "convene a task force to consider different options to phase-in and expand" paid family leave.

Though a lot of details need to be worked out, the field is excited to have so much attention on children and families from the state's top politician. This is a big change from slashes that had been proposed in years past.

— Contributed by Priska Neely

HIGHER EDUCATION

Free community college tuition for second year

Newsom's budget proposal includes $1.4 billion for higher education that's meant to be used to open seats for more students, encourage quicker graduation and ensure that tuition doesn't go up.

In previous years, public university administrators often bemoaned what they felt was insufficient support for higher education in the January budget proposal. The tone is different this time around.

"This marks the single largest proposed investment by any governor in the history of the university, and we are extremely appreciative of Governor Newsom's bold investment in us," California State University Chancellor Timothy White said in a statement. The budget plan includes a $300 million ongoing increase for the 23-campus CSU system.

California's student community college system has made headlines in recent weeks as Newsom announced that the budget proposal would include a $40 million line item to pay for a second year of community college tuition for first-time, full-time students.

Those conditions will significantly restrict how many students would benefit, since only about 30 percent of the state's two million community college students attend full time.

In addition, "any commitment the state makes towards college affordability has to go beyond covering the cost of community college fees," Audrey Dow, senior vice president of the Campaign for College Opportunity, said in an email.

She and others stressed that there are other, often higher, costs that keep community college students from earning their degrees.

— Contributed by Adolfo Guzman-Lopez

TRANSPORTATION

Spending on roads, bridges, transit

The governor's budget includes $4.8 billion for state and local transportation projects, including repairs and maintenance to highways and local streets and bridges, transit operations and hundreds of millions more for investments.

The allocations were made under Senate Bill 1, the transportation package funded by increases to the gas tax and driver fees, which was passed in 2017.

The governor has proposed linking transportation funding that would go to local governments in the future to how well those jurisdictions meet state-mandated housing goals. These require cities to build enough housing to meet the demands of population and job growth. Many California communities have fallen far behind on meeting their goals, leading to a housing affordability crisis in the state.

Newsom highlighted the fact that his budget would pay off in full loans that were taken from transportation funds during the years of budget deficits before the current recovery. Proposition 69, which passed in June 2018, created a constitutional amendment to put transportation funds in a "lock box," protecting S.B. 1 revenues from being diverted for non-transportation purposes.

— Contributed by Meghan McCarty Carino

INFRASTRUCTURE

Millions for wildfire prevention

There's not a lot of room in a budget for infrastructure projects when 81 percent is devoted to education, health and social services.

One of the key areas of increased spending is on wildfire prevention. In all, a new $415 million is proposed to buy helicopters, airplanes and fire engines. The money is meant to pay for new California Conservation Corps forest maintenance crews to reduce fire danger and add fire-spotting infrared cameras in forested areas. In addition, Newsom wants to add a fee to cell phone and landline services to raise $60 million to improve emergency 911 services. He calls for $16.3 million to build out California's Earthquake Early Warning System.

California voters last year approved the continuation of new fuel and vehicle taxes, so spending on road and transportation projects will go forward as planned with an expected $4.8 billion coming in.

Newsom said he planned to put out a five-year infrastructure plan to give priorities for how the state's share of the new taxes would be spent, so no new specifics were rolled out in the budget speech.

However, the governor's budget does commit nearly $316 million of one-time money (that is, money not raised in recurring taxes) to spend on maintenance projects that had been delayed. It doesn't put much of a dent in the state's $70 billion in lagging maintenance, but it does include $112 million for prisons, $45.6 million for state parks, $40 milion for courts, and $35 million for state hospitals.

The state Department of Toxic Substances Control has already been provided with nearly $177 million to clean up 2,500 properties contaminated by the Exide lead acid battery plant in Vernon that closed in 2015. The governor's new budget adds another $50 million to accelerate the cleanup of 700 additional contaminated properties within about a 1.7-mile radius.

The budget proposal would redirect nearly $169 million in Proposition 68 money (bonds for parks, recreation and water projects) in the form of loans and grants to improve public water systems in disadvantaged communities. In Los Angeles County, the tiny Sativa water company was taken over by county officials after water quality deteriorated, and it needs millions of dollars in upgrades, so conceivably some of that money could be headed toward that and similar systems.

— Contributed by Sharon McNary

HOUSING

Millions for wildfire prevention

Newsom's first budget proposes spending almost $8 billion on housing and homelessness — about $3 billion more than former Gov. Brown's last budget. That's spread across a smorgasbord of programs intended to build more homes and ease the housing shortage.

That means subsidizing affordable housing construction, rental assistance programs, tax credit programs, and pushing cities to zone for more apartments. Newsom said the state might eventually withhold funding if local cities fail to build enough new homes. According to an analysis prepared by the consulting firm McKinsey&Company, California is short about 3.5 million homes relative to its population.

The single biggest proposed increase from last year's budget is an additional $500 million for the state's first-time homebuyer assistance program — a total of $2 billion.

Incidentally, $500 million is the same amount Newsom's budget proposes handing over to local cities to mitigate the state's homelessness crisis. That would be used to develop local plans for ending homeless and emergency shelter construction.

— Contributed by Matt Tinoco