Governor Newsom unveils 2024 California budget as $16 billion Delta Tunnel project moves forward

SACRAMENTO –  At a widely-covered media last week, Governor Gavin Newsom unveiled his $291 billion proposed 2024-25 budget for the State of California as the state faces an expected $37.8 billion budget deficit.

The budget draws $10 billion from the state’s budget reserves to address the deficit while Newsom continues to push forward with the Delta Conveyance Project, AKA Delta Tunnel, that will indebt Californians for decades to come at a cost of at least $16 billion.

“Recognizing increased uncertainty due to a decline in the stock market and federal tax deadline delays, the 2023-24 state budget passed in June set aside record reserves of close to $38 billion to prepare for a potential shortfall,” according to the Governor’s Office.

“Thanks to the record reserves we have built up and a commitment to fiscal discipline over the years, our state is in a strong position to close this shortfall while protecting key priorities and programs that millions of Californians rely on,” Newsom said.  “This balanced budget plan keeps California on firm economic footing while continuing our work to tackle homelessness, keep communities safe, expand access to high-quality education, overhaul behavioral health care and fight climate change. I look forward to partnering with the Legislature to meet this moment with a balanced approach that meets the needs of Californians and safeguards our state’s future,” concluded Newsom.

Despite the downward revision, the Governor said the 2022-23 revenues are estimated to still be 23 percent higher than pre-pandemic levels. He said California’s GDP “remained strong” in 2023, and the state’s big three revenues are projected to return to levels consistent with a normal revenue growth trajectory.

Details on the Governor’s water and climate spending can found in the Governor’s Budget Summary, pages 33-46. Other details on the January budget proposal can be found at www.ebudget.ca.gov.

In response to the budget proposal release, Barbara Barrigan-Parrilla, executive director of Restore the Delta, pointed out the absurdity of the Governor’s Office forging ahead with the multi-billion dollar Delta Tunnel at a time of fiscal cutbacks as the Governor portrays the tunnel now as a “climate project.”

“As California enters a year of fiscal cutbacks, we proposed canceling all spending on Newsom’s Delta Tunnel,” said Barrigan-Parrilla. “This proposal (rejected by Californians since 1982) faces an uncertain permitting process.“

“It will waste at least $16 billion dollars that could be spent on actual climate resilience projects like rural groundwater recharging and urban floodwater capture. Every struggling California family knows that money not spent on frivolous things can be used on essential items that help us get through the tough times,” she continued.

“According to Newsom’s Department of Water Resources, the Delta Conveyance Project will produce about 240,000 acre-feet of additional water in wet years only. At a bond payback rate of $1 billion per year, that means when water is available it will cost about $4200 per acre-foot, and in numerous years, there will be no additional water, but the bond payment will need to be made. This is not serious climate water planning,” she stated.

Assemblyman Carlos Villapudua (D–Stockton) also released a statement opposing Newsom’s inclusion of the Delta Tunnel in his spending plan.

“Prioritizing the environmentally dangerous and wildly expensive Delta Conveyance Project during difficult fiscal times is nothing short of baffling,” Villapudua said. “This water grab would inappropriately divert our already-strained fiscal resources. We need to remain focused on public safety, housing and homelessness, education, transportation infrastructure and healthcare.”

Villapudua also said California’s water sustainability efforts “would also be disrupted if the state does not prioritize more thoughtful and appropriate projects, such as groundwater recharge, recycling plants, levee maintenance and storage.”

While Newsom claims to be a “climate leader,” it is telling that Newsom’s budget proposal would cut $2.9 billion from California’s programs for addressing climate change and transitioning away from fossil fuels. ⁦In the LA Times, reporters Ian James and Hayley Smith looked at how the budget cuts could affect the state’s climate programs: www.latimes.com/…

The California Budget & Policy Center, a nonpartisan research and analysis nonprofit, criticized Newsom for not proposing new tax revenues, including increasing taxes on wealthy residents and removing tax breaks for corporations.  The Budget Center responded to the unveiling of Newsom’s proposed budget with the following statement from its executive director, Chris Hoene:

“State leaders possess both the tools and responsibility to assist Californians, safeguard critical services, and address the 2024-25 budget year deficit. With a variety of budget tools — including raising additional revenues — state leaders can fulfill their duty to ensure the well-being of Californians and navigate the challenges ahead.

“Despite the budget shortfall, California is home to great wealth. Governor Newsom’s resistance to raising revenue and making the state’s tax system more fair poses a risk of additional cuts to essential services like healthcare, education, poverty reduction programs, climate resilience, and public transportation, making it even harder for Californians who are already struggling to get by.

“State leaders should exhaust alternatives to austerity measures, which would disproportionately negatively impact low-income communities and Californians of color. The governor’s proposal for ongoing reductions to CalWORKs supportive services, delays to programs that help address the homelessness crisis, and the lack of new investment in affordable housing, are particularly concerning because they would harm Californians who are facing the greatest need.

“In addition to responsibly drawing down budget reserves and reducing unallocated one-time and temporary spending, policymakers can increase state revenues by eliminating costly tax breaks to ensure profitable corporations and the wealthy pay their fair share in taxes. Even temporary suspensions of certain tax breaks could play a crucial role in ensuring a fair distribution of our state’s wealth and help leaders address the shortfall.

“The silver lining here is that California is far better equipped to tackle this challenge than it was heading into the Great Recession, courtesy of a decade of prudent budgeting and savings in the state’s rainy day funds. This resiliency is evident by the governor’s steadfast commitment to expanding full-scope Medi-Cal to all Californians regardless of immigration status, maintaining a strong CalEITC and Young Child Tax Credit, preserving investments and reforms to education systems, and safeguarding mental health investments, all of which are essential for building a more equitable state. However, there is still much more room for improvement to enhance Californians’ well-being and secure our state’s fiscal future.”

In a similar vein, Rise Economy Chief Executive Officer Paulina Gonzalez-Brito said BIPOC, LMI Communities are set to bear the brunt of deep cuts to climate change and affordable housing programs in the Governor’s proposed budget:

“While acknowledging the challenges posed by California’s potential $37.9 billion deficit, we are deeply concerned with Gov. Newsom’s plan to close this financial shortfall, which outlines plans to divert billions of dollars away from vital affordable housing and climate change programs.

“The proposed $3 billion in cuts from climate programs and $1.2 billion in cuts from housing programs are likely to have a significant impact on all Californians. However, as it often happens, low-income and Black, Indigenous and People of Color (BIPOC) communities will be hit hardest.

“Climate change already disproportionately affects low-income and BIPOC communities. A study published in the ‘Journal of Exposure Science & Environmental Epidemiology’ found communities that were previously redlined have a higher concentration of oil and gas wells in their neighborhoods compared to predominantly white neighborhoods. This has led to a host of negative health outcomes for these communities. Adding to that, California is already facing a severe housing crisis due in part to private equity companies’ consolidation of available housing stock — fueling displacement statewide.

“Diverting billions of dollars away will only make these problems worse.

“Rather than blanket cuts to these programs, we encourage Gov. Newsom and the state legislature to consider alternatives to addressing the state’s budget shortfall. One such solution is a state-level Community Reinvestment Act (CRA) that would discourage financing activities that fuel climate change and also establish a reinvestment obligation for credit unions, independent mortgage companies, state-chartered banks and financial technology companies. Based on our recent Community Benefits Agreements, banks have agreed to reinvest an average of four percent of their total deposits annually. Using this figure, state-chartered banks and credit unions alone have the potential to reinvest upward of $15.3 billion per year for affordable housing and economic development.

“We understand the give-and-take that will be required to close the projected deficit. However, the budget cannot be balanced solely at the expense of the economic well-being of low-income and BIPOC communities. By looking toward innovative policy that helps address systemic inequities, California can build a more resilient future for all its residents. Rise Economy looks forward to working with Gov. Newsom and lawmakers to ensure that we can address budgetary shortfalls without taking away from those who are already struggling.”

As I receive more responses to the Governor’s budget proposal, I will post them here.