Newsom Budget Adds Billions for COVID-19 Relief, K-12 Schools

Gov. Gavin Newsom presented an upbeat outlook as he unveiled his proposal for the 2021-22 state budget Friday, saying that despite the coronavirus pandemic-induced recession, California is poised for a strong recovery.

Newsom’s $227 billion budget proposal highlights the extent to which California’s progressive tax structure will help the state weather a recession. Despite historic levels of unemployment and a precipitous drop in the state’s GDP last year, the tax income from wealthy residents has resulted in a $15 billion surplus for the budget year beginning in July.

"The state is still this remarkable, remarkable home to more dreamers and doers than any other part of the globe," Newsom said.

One of the biggest winners in the proposed budget is the state’s K-12 school system, which stands to receive a record $85.8 billion under the governor’s proposal.

“We are proposing to the Legislature a record investment in our public schools,” Newsom said.

The budget plan typically covers proposals for the following fiscal year, which begins in July. But because of the unexpected windfall in tax revenue, Newsom is also proposing $5 billion in immediate investments he hopes lawmakers will approve this month on schools and COVID-19 relief.

That includes $2.4 billion for one-time $600 direct payments to low-income Californians.

“Four million people get the benefit of that program if we move quickly,” Newsom said.

Additionally, the governor wants to see $575 million for grants to small businesses and nonprofits struggling because of the pandemic-induced recession, $71 million in fee waivers for small businesses adopted and $2 billion to help schools reopen safely.

Newsom also wants to extend an eviction moratorium that is set to expire at the end of January.

Generally, Newsom said his budget is focused on meeting the most urgent needs of Californians, which he listed as vaccination rollout, safely reopening schools, providing support for small businesses, putting money in the pockets of Californians who need it and wildfire preparedness.

“Clearly California is poised for an economic recovery,” Newsom said Friday. “We are in a much better fiscal footing than anyone would have thought a few months ago.”

But he warned that the fiscal picture a few years out is not as rosy, with a projected deficit of $11.3 billion by the 2024-2025 fiscal year.

"While we are enjoying the fruits of a lot of one-time energy and surplus, it's not permanent," Newsom said. "We have to be mindful of over-committing ... and exacerbating some of the structural challenges that we still have to face going forward."

And, Newsom said his administration is focused on helping those who are struggling the most right now.

“We are all better off when we are all better off,” he said.

California Republicans have criticized Newsom's response to the pandemic – particularly his restrictions on businesses and gatherings.

Assemblyman Vince Fong, R-Bakersfield, the vice chair of the Assembly Budget Committee, said Newsom's budget proposal doesn't change the fact that the governor is "failing."

"Sacramento is failing to address California’s affordability crisis, homelessness crisis, power shutoffs, and an incompetent EDD bureaucracy," Fong said in a statement.

Reopening Schools?

In recent weeks, Newsom has charted a course for the youngest California students to return to in-person instruction as soon as February.

The governor proposed spending an additional $2 billion in the current budget year on testing and protective gear in order to incentivize schools to reopen their doors for grades K-12.

The plan would apply to schools in counties with fewer than 28 coronavirus cases per 100,000 residents – a threshold that all but a handful of counties in the state have surpassed.

“If we can’t do it safe, we can’t do it,” Newsom reiterated on Friday.

This week, a group of large school districts – including Los Angeles, San Diego, San Francisco and Oakland – criticized the plan for setting an unrealistic benchmark for bringing kids back to classrooms.

“A funding model which supports only schools in communities less impacted by the virus is at odds with California’s long-standing efforts to provide more support to students from low-income families,” the districts wrote in a letter to Newsom. “The initial target date of Feb. 1 doesn’t reflect the COVID reality in many of the communities we serve.”

Newsom said he would be meeting with the leaders of seven school districts on Monday, and his proposal provides full funding for districts whose opening is delayed by the virus spread.

A new round of relief funding from the federal government could add another $6.7 billion for California schools, Newsom said.

COVID-19 Response

Newsom’s proposal comes as the state faces the darkest days yet of the pandemic. Hospitals are overrun in some areas and rationing care.

Newsom said he wants the state to invest billions more dollars in testing, tracing and vaccine distribution – much of which would be reimbursed by the federal government.

“Not lost on anyone is the importance and imperative of continuing our investments on testing and contact tracing, isolation and quarantine,” he said.

Among his proposals: $300 million for vaccine distribution, which he calls an initial investment and said would include a public awareness campaign to increase vaccine adoption.

'Doubling Down' on Project Homekey

The governor is hoping to continue purchasing hotels and motels in the state and converting them to housing for the homeless.

The program, dubbed Project Homekey, began as a way to identify temporary housing for people experiencing homelessness during the pandemic. By the end of 2020, the state had spent nearly $900 million to purchase and convert more than 6,000 units into permanent housing, complete with supportive services for residents with health or addiction issues.

Now Newsom is proposing to spend $750 million to continue the motel acquisition program, with a third of the money to be spent in the current fiscal year.

“Because it worked, we’re hoping to double down on it,” Newsom said.