May 14, 2020
Governor Gavin Newsom May 14 California COVID-19 Briefing Transcript
Governor of California Gavin Newsom’s Thursday, May 14 press conference on budget revisions. Newsom is proposing a 10% pay cut for state workers in addition to billions of dollars in additional cuts to help with a $54 billion deficit.
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Gavin Newsom: (05:59)
All right, well, good afternoon, everybody. It goes without saying that these are not ordinary times and as a consequence, this will not be an ordinary budget presentation. I come up to you today with no notes and just four simple slides, slides that lay out where we are and where I believe we are going. But first I want to talk about where we were just a few months back standing right here on this stage, standing right here in front of you introducing my January budget. It was a time in the state of California, where we were regaling folks about our economic growth and incredible economic vibrancy and economic output that the state was enjoying a $3.1 trillion year economy, the nation’s largest economy and the world’s fifth largest economy. We were talking about record low unemployment. We were talking about our record reserves and we were debating how to balance a record amount of surplus.
Gavin Newsom: (07:08)
We had remarkable bragging rights in this state where we reflected on the fact that one out of seven American jobs, since the great recession were created here in the great state of California. We talked in terms of California being the temple of the American economy in terms of economic output and also job creation. We enjoyed a surplus that we were projecting modestly at $5.6 billion, but everybody knew that number was on the lower end. In fact, there was one estimate that came out of legislative analyst office that said that that surplus number did not include what we referred to as the MCO tax.
Gavin Newsom: (07:49)
Remarkably, we were successful in getting the support of the MCO tax that would have increased that budget surplus by at least $1.7 billion. We had $1. 35 billion a little over $1.3 billion of revenue above even our projection that we were running just few weeks after we announced our January budget. It’s a long way of saying this state was in strong fiscal conditions, strong fiscal health, and we were prepared to make historic investments to invest in our future and invest in our capacity to continue to lead and continue to grow.
Gavin Newsom: (08:33)
Of course, that was January few weeks after that budget, we started to work with the federal government on repatriation flights coming over from mainland China, six flights related to this coronavirus. We clearly, the time had an expectation that this was serious but none of us had a sense of how serious the focus appropriate at the time was public health. But as you can see from this slide, not only was the state of California impacted by what was to come, but the entire nation and of course the world’s economy. You can just see here in this chart, U.S. recession that’s been induced because of COVID-19 26.5% decreased just in the spring in the nations output. Just like that, almost a blink of an eye in fiscal terms, certainly a blink of the eye, 60, 70, 80 days later in a completely different position, not just again, the state of California but the entire nation.
Gavin Newsom: (09:40)
The good news though for those that watch and follow the work that has been done here in this Capital work done by the previous administration, governor Brown and the outstanding leadership that he advanced in terms of his fiscal stewardship of the state over the last two terms, combined with the talents and similar stewardship by legislative leaders, we enter into this moment in a much better place than we have previously entered into any recessionary moment. And I say that soberly not naively. And I don’t say that triumphantly we are going to be dealing with challenges that we haven’t faced in some time. But it is important to note when we talked in terms of the surplus that we were debating last year, that operating surplus was in the range of 21 and a half billion dollars. That was last year’s operating surplus, that we were responsible for balancing.
Gavin Newsom: (10:42)
We debated that surplus and we did a lot of things that I hope make this situation a little bit better today. We paid down debt and the final $4.5 billion in debt from that wall of debt, the infamous wall of debt here in the state of California, that at the time it totaled $34.7 billion. The final payment was done last year, $4.5 billion completely eliminating that debt. We were thoughtful perhaps more so than even the last decade and a half of using those surplus dollars, very prudently, even more so than in prior years where 88% of those one time surplus dollars went to pay down one time obligations or to invest in just one fiscal year’s investment. Meaning we tried to reduce the amount of ongoing expenditure substantially, thus the 12% reflected in this slide of new ongoing commitments.
Gavin Newsom: (11:41)
In budget terms that is a fiscally conservative approach that we entered into last year, including by the way, making commitments to pay down longterm obligations, pension obligations, not just paying off that wall of debt. That allowed us to increase our reserves to a record $ 16.2 billion. That was just one of a number of reserve accounts in the state. And I’ll talk about not only that reserve account, but talk about a number of other accounts where ought to put aside money, not just in a rainy day fund for a rainy day, but social safety net fund that we had set aside some $524 million that was set aside in our budget under prop 98 provisions for our public education system, including some economic uncertainty dollars that were set aside. A long winded way to say this, we weren’t just asserting fiscal discipline, we were proving it so much so that our bond rating increased twice last year and was increased the highest level in over two decades.
Gavin Newsom: (12:50)
And as a consequence of that borrowing costs for the state of California declined. It’s a long way again of saying we’re entering into this time of uncertainty in much better place than we entered into it in for example, 2003, or for that matter 2009 or in more contemporary terms, 2011. We are in a position where I can advance at least a commitment to you that while the numbers have certainly changed, our values remain. And we are committed despite the headwinds of a $54.3 billion budget shortfall that we are entrusted to balance in the current fiscal year and into the next budget year to advance. And not only an effort to balance the budget, but also to balance our principles and to advance our values and those core values, those core principles, I think are well reflected in the slide you see next to me, public education, public health, public safety, and always an eye on people that have been hit hardest by COVID-19.
Gavin Newsom: (14:08)
I am not naive by any stretch of the imagination. Well, as painful as the state’s budget may be personal budgets for so many of you watching are even more devastating. You’ve exhausted your savings. Your credit has been completely destroyed. You are desperate to get a sense of not only your fate, but our collective future. Some 4.6 million of you have filed for unemployment claims just since March 12th, we are at a time that’s simply unprecedented. And when I mean unprecedented, we talk in terms of that great recession. That great recession we had unemployment that peaked at 12.3% in the third quarter in 2010, some 2.2 million people were out of work. I’ll go back to what I just said, 4.6 million Californians just since March 12th have filed for unemployment insurance claims or assistance under our PUA program. 2.2, the peak in 2010. Now 4.6 million filing claims so far just since March.
Gavin Newsom: (15:23)
We are projecting in our documents, we’re putting out today in our May revise of that January budget, that unemployment will peak North of 24 and a half percent. One could argue we’re already there. We are projecting though that as a peak, the budget year, we are projecting that we will come in roughly at about an 18% unemployment number. This is simply without precedent. These numbers, these unemployment numbers, the economic consequences of COVID-19 are not only in being felt statistically, but they haven’t been felt like this since the great depression.
Gavin Newsom: (16:03)
These are not normal numbers, even in a state so familiar with the vagaries of revenue that growth increases and declines because the volatility of our tax system, these are simply without precedent in modern times. So the economic consequence real and that’s why I just want folks to know that we are very mindful that while this may be an academic exercise an intellectual exercise of balancing a state budget, this translates very differently to the folks watching that are trying simply to pay the bills, to keep their lights on, to be able to figure out some semblance of optimism about their capacity, get back to work and once again provide for their family and their future.
Gavin Newsom: (16:54)
Dreams, quite literally being torn asunder in real time, lives continuing to be lost including 98 human beings that lost their life just in the last 24 hours related to COVID-19. These competing and confounding and compounding factors are front and center in terms of our consciousness and in terms of our mindset, as we move forward to balance this year’s budget. Let me now talk about this year’s budget in more specific terms. Now the current budget proposal May revise we’re putting out reflects a decline of 22.3% in revenue from the January budget. The budget we put out today is $133.9 billion general fund, some $203.3 billion overall budget. The general fund reflects a 9.4% decrease from the budget act of 2019. The overall budget about a 5.4% decrease from the 2019 budget act.
Gavin Newsom: (18:08)
It’s important to note that the revenue decline, the 22.3% revenue decline that I referenced just a moment ago, that comes from three major categories, personal income tax, corporate tax and sales tax. Not surprisingly our sales tax revenue projections are taking the biggest hit. Consumers, obviously not able to make the kind of purchases they once were only essential. People are obviously tightening their belt as a consequence our revenue projections, in terms of decline in sales tax revenue is 27.2%. We’re projecting a personal income tax. The pit, as it’s referred to in budget language to decline by 25.5% and corporate tax by 22.7%, but all tolled in those three main categories, a revenue decline of over 22.3%. And so we start there, that’s the baseline no longer a projected surplus North of $6 billion, but now a projected deficit for the current fiscal year and the budget year that we are announcing and advancing here today of $54.3 billion.
Gavin Newsom: (19:29)
Now let me explain why we believe it’s $54.3 billion, we cleaned up the 2018 and 2019 budget year not surprisingly that showed up as a net gain of about $700 million. I don’t want to lose too many of you on this, but I do want to just quickly sum up the foundational challenge that we have. So we had some good news there, but in the current fiscal year, obviously some bad news, $9.7 billion reduction in our projected deficit and into the next fiscal year, we’re projecting a $32.2 billion budget shortfall. So roughly 41.2 billion is the projected deficit. Not assumes no increased caseload, no increased costs and expenses to help the most vulnerable California’s ones cannot assume that. And as a consequence we add roughly $13 billion to that total 13.1 billion to be exact thus the total budget projected deficit for the current fiscal year and the budget year of $54.3 billion.
Gavin Newsom: (20:41)
So that’s the magnitude of what we’re called upon to address. You may say, well, that’s the biggest budget deficit we’ve ever heard in California’s history. In a remarkable way it is not, the economic consequences, the personal and professional consequences those unemployment numbers certainly are, but the budget numbers are not in this respect. Not only do we come in with more fiscal health than we have in the past, into this recession with more ample reserves and more capacity for deferrals, the ability to borrow where it’s appropriate under these circumstances. But also we come in with a substantially larger general fund than we have seen in the past. Just to put it in statistical terms and this is cold comfort for those watching roughly 45% was the budget shortfall in 2003, 58% in 2009, 58% in 2009, you may recall it 2009 budget deficit came in a roughly $60 billion shortfall.
Gavin Newsom: (21:50)
2011, it was about 30.8%, 31% of the challenge. This year we’ve projected roughly 37%. So this is challenging, this will be trying and this certainly will be a multiyear opportunity and effort. And I say that because I want to begin there. We are not arguing to solve a $54.3 billion shortfall over night. We are looking not only at the current fiscal year and next year’s budget year, but we’re looking at a multiyear strategy to work through this budget deficit. Let’s start with the reserves $16.2 billion of reserves. We are calling to pull down some $7.8 billion in year one from the $16.2 billion of reserves. In year two, we want to bring down an additional $5.4 billion. In year three, $2.9 billion. So we are committing in the documents we’re putting out here today to use all of the $16.2 billion in the rainy day reserves, but do it over a three year period, because no matter what we do this year, it won’t be enough to address the shortfall next year.
Gavin Newsom: (23:13)
And we have to be mindful of our responsibility to balance the budget every year, but do so strategically. Remember no printing press here in the state of California. We are constitutionally obliged to pass a balanced budget. You don’t get to obviscate, you don’t get to mediate, you don’t get to deviate from that foundational principle. It’s a responsibility to submit and to approve a balanced budget and that is our requirement through the next number of weeks has to be done by July 1st of this year. But again, we’re looking at a multiyear strategy and that strategy will include pulling down that rainy day reserve in a sequential way, 7.8, 5.4, $2.9 billion. I mentioned just a moment ago that the rainy day reserve is one of a number of reserve accounts in the state of California.
Gavin Newsom: (24:13)
The other reserve account was created a few years ago by the outstanding leadership of our budget chair in the Senate Holly Mitchell was her brainchild to put together a safety net reserve. And thankfully she did that with her colleagues and with leadership in the assembly and the Senate and the support of our administration and the previous administration. That reserve account has $900 million in it. We proposed to the legislature that we use $450 million in this budget year and an additional $450 billion in the subsequent budget year. So like the rainy day reserve, we draw down over three years, the safety net reserve, we draw down over two years. So there you have 7. 8 rainy day reserve, $450 million in the safety net reserve. Finally, there was a reserve that was little noticed, but certainly Holly debated that was probably never even imagined that we ever see triggered in our lifetime under the prop 98 guarantee. And that’s the guarantee that supports our K-14 education system that reserve went in to effect.
Gavin Newsom: (25:27)
A couple of years ago, we started putting money in the reserve. Last year, we had $524 million in that reserve. And thankfully, we’re going to pull all $524 million of that surplus in to pay down this deficit and help support our education system this year. So you have those three reserve accounts, roughly all totally $8.8 billion. So that’s 8.8 billion on our way to solving a $54.3 billion problem. That’s nice. That’s roughly 16 or so percent of the solution. The obvious question is, what else are we going to do? Well, we clearly have been blessed by the incredible leadership of speaker Nancy Pelosi and the strong support by partisan support of our congressional delegation and Democrat Republican leaders across this country and the president himself with the CARES Act. The CARES Act will provide us a traditional 15% of relief in terms of ultimately balancing our budget.
Gavin Newsom: (26:35)
So 16% relief from reserves, 15% relief from the CARES Act. In January I stood up here and I promoted a number of important programs, things that I think overwhelmingly were supported and certainly appeared once again to be embraced by the legislature, focus on expanding our preschool for all programs and investment and further expanding healthcare to those that are currently without coverage series of specific proposals that we made in January. The overwhelming majority of those proposals, we are now pulling back. Those are enhancements to the base line budget, the vast majority, not all, but the vast majority we’re pulling back that represents an equivalent 15% of the solution. Reserves 18%, federal government 15%, the pulling back of these new programs that we were hoping to invest in, in January provides us an additional 15%.
Gavin Newsom: (27:43)
There are three additional categories now that ultimately get us to a balanced budget. The number one area of consternation that just a year and a half or so ago that I highlighted was some of the borrowing from special funds and some of the deferrals into new fiscal years that were done in the past. And I made an oblique comment. I said, “I’m looking forward to ending these things.” And the first budget that I submitted upon becoming governor, but I also did that and made a side comment. I said, “Play the tape because it’s not unlikely that I’ll be forced by conditions to come back and utilize some of those examples in the future.” I never imagined to be back a year later under these extraordinary circumstances, but the ability because we had cleaned all of that up because we had fixed all of that because we had tightened our belt and are better positioned to go in here. That opportunity affords us about 19% in solutions in this budget.
Gavin Newsom: (28:51)
So we’re going to use a little bit of that. We think it’s a very strategic and very prudent under the circumstances because the magnitude of problem that occurred and manifested so quickly. So you’ve got the 16% in the reserves, 15% I’m pulling back investments from January, 15% from the federal government, 19% in terms of some of these deferrals and strategies to balance our books in a way that is well known and well-described in the past here in the state of California, again, afforded because we had cleaned a lot of that up in the past. That leaves us with two areas that more traditionally are defined in terms of balancing budgets. And that is how do you find some revenue and how do you define what’s appropriate to cut. Nothing breaks my heart more than making budget cuts.
Gavin Newsom: (29:45)
We have been making historic investments in the last many years in the state of California. And now being forced back into this position where we are having to make cuts, breaks my heart. Because one thing I know about cuts, there’s a human being behind every single number behind every category is a dream that is either deferred, in some case, a dream that is denied. I’m sober about it. I’m not naive about cuts. 26% of our solutions would come into this category of cuts, but cuts with a caveat. And I want to make this crystal clear, we have been making it crystal clear over the course of the last many, many weeks. And that is, these are cuts that can be triggered and eliminated with a stroke of a pen. President of United States with a stroke of a pen could provide support for speaker Pelosi’s new heroes act and these cuts would be eliminated.
Gavin Newsom: (30:47)
These cuts would be triggered and the language in our budget directly triggers the elimination of these cuts. It’s in the control section of the budget act. Reason I use that in technical terms is I want you to know that’s not rhetorical. We are quite literally writing it in to the budget act in the controlling section that if the federal government does what it must do under the circumstances to help States large and small all across this nation, that these cuts would go away. And when I list off and we’re going to have Keely and my budget team come up here and they’re going to go through all the details for you as is our responsibility and your right to know, you will hear of cuts that make none of us proud, but the values nonetheless, we are holding onto, I think and hope will. And I’m going to get to those in a minute as proof points that, that also is not just rhetorical flare.
Gavin Newsom: (31:49)
So 26% are in the category where the federal government provides the support and relief for States, cities, and counties that those cuts will not go into effect. The final point is about an 8% solution on net operating losses and tax credits that we want to tighten up. That’s on the revenue side, roughly $4.5 billion of the total solution. So you add all those numbers up, you get to 100%, you add all those numbers up, what those percentages reflect and budget dollars that’s your $54.3 billion of scaffolding and architecture around this budget. But let me go back, I talked to you about values, I talked to you about what we’re protecting, I want to now make that visible, make that real, not just again, rhetorical. When we talk in terms of values, as I said, numbers change values don’t have to, values remain. The values that I don’t know, I ran on to become your governor, but I think the values we overwhelmingly hold dear, regardless of our political stripes, regardless of our time of life-
Gavin Newsom: (33:02)
stripes, regardless of our time of life, values that we hold dear, precious on the investment in the future, investment in our children. You want to look in the eye of a child to see the mirror, the reflection of our capacity as a society. It’s always reflected in the eyes of young children. Right now, those eyes are reflecting back a $19 billion impact to Proposition 98 in the education sector and in this budget; $19 billion.
Gavin Newsom: (33:32)
But I want you to know that we are not just going to roll over and accept $19 billion of cuts to public education. And let me be specific and tell you what I mean; we’re going to use some $4.4 billion from the Cares Act to allow for real discretion in real time and put that money, rather than in the general fund, we’re going to put it into public education, 4.4 billion, to address the issue of learning loss, to address the social emotional challenges that our kids are facing, the trauma and stress their families are facing because of not only lost school time, challenges with distance learning, but the anxiety induced this moment, to help with summer school and to help with the flexibility that the districts are going to need to consider on their own, in a district by district basis, what they feel is best for them to address the learning loss. And that includes possibly extending the school year, bringing that school year later into the summer and the like. But this will be discretionary money to substantively address some of the short term anxiety; that’s $4.4 billion.
Gavin Newsom: (34:46)
Additionally, we had made commitments, at the top of this I mentioned those commitments, around paying down longterm pension obligations, our purs and our stirs system. We’re going to use one of those payments that was scheduled to pay down these pension obligations, but under the circumstances, the immediate needs, I think require this of all of us. We’re going to use $2.3 billion that was scheduled to be invested over 30 year period to pay down pensions, to address the immediacy of the crisis in our public education system. So 4.4 and another $2.3 billion. I mentioned net operating losses, I mentioned tax credits. About $1.8 billion of that 4.5 billion revenue that would be generated would go in to that 98 count also reducing the stress.
Gavin Newsom: (35:40)
There’s an additional $1.6 billion that comes independent of the state contribution in terms of the Cares Act that goes directly to K through 14. That money, $1.6 billion also goes to reduce the size of that $19 billion shortfall. You start adding this up, now we’re North of 10 billion, $10.1 billion in terms of quicker solutions. Two other things we’re committing to do: the deferrals also are in this category, which we believe can help alleviate some of the stress related to this system. There are reserves that exist also within the school districts, and there’s this very important point: we are committing 1.5% of our general fund, and I know this can be very technical and I’m going to lose 90% of the people, 99% of you watching at home, we have something called the maintenance factor. There’s a lot of complexities around how Proposition 98 was advanced to protect public education funding, and we are obvious to those concerns.
Gavin Newsom: (36:51)
And as a consequence, we are committing as a recommendation to the legislature, all of this, as a recommendation to the legislature. We are committing to taking 1.5% of the general fund averaging about $2 billion a year, going up to $4.6 billion a year to do a supplemental payment under Prop 98, so that the cuts… And by the way, the 19.1 billion annualizes at about 13 billion. You can ask me a question on that; I don’t want to confuse you. But with these additional supports that I mentioned, and the commitment of a supplemental payment and knowing that commitment will be made, not just advanced, of a minimum of roughly $2 billion a year, it will communicate very clearly, should, to these districts that these cuts are not permanent, and as a consequence, make decision making with that mindset, I think a lot easier, more flexibility in that space.
Gavin Newsom: (37:53)
So, when we talk about values in education, we mean it. But again, I’m not naive. There is a cut, the LCFF. I’m not going to touch the categoricals or the supplementals, So we have an equity lens in terms of our approach, another value we hold dear. But the LCFF cuts of 10% clearly are going to be a challenge, and we look forward to working with our district, and we’ve already been working very closely with the superintendent of public education who has been a champion of putting front and center these concerns, not only on my desk, but our team’s desk, and of course Linda Darlene Hammond, who has been working over time to help us with these proposals as well. I just want to congratulate and thank them for all their hard work, and I recognize that work is just beginning, now that the clarity in terms of the May revise is coming into a clearer picture.
Gavin Newsom: (38:47)
Let me just make one final point on education, and I’ll move on to two additional items and then answer questions, and then we’ll have the detailed [inaudible 00:38:55] presentation by my finance team. I care deeply about special education, and I could not, in good conscience, be part of dismantling of a commitment we had made a well over a year ago to substantially improve special education in the state of California. Nothing breaks my heart more than seeing people with physical and emotional disabilities, people so often left behind and forgotten, falling even further behind. We are not even close to where we need to be in terms of protecting those folks. And as a consequence, we are going to analyze that $645 million commitment for special needs children and not cut that in this budget under Prop 98. Forgive me for that expression, personal expression, not just a professional one, but it is a point of pride and privilege that at least in this May revise that I am not going to make that case that that budget be dismantled.
Gavin Newsom: (39:57)
That said, we wanted to enhance it even further this year, that will not be denied. But unfortunately, because of the budget, may certainly look to be delayed. As it relates to public health, one thing we’re not going to delay is our commitment to your health. We talk in terms of dollars and cents. Budget is about dollars and cents. It makes sense to some, maybe less to others, but we also have to talk in terms of life and death. And we’ve been talking in terms of life and death as the first state to do the stay at home order to take seriously this pandemic to flatten that curve so it never increased. We believe we’ve saved lives. We believe we protected the public health of the people of the state of California. And we are proud in this state to have done more in terms of expanding healthcare to those without it and deepening subsidies for those with it into the middle class than any state in this country, and we’re not going to back away from that progress.
Gavin Newsom: (40:57)
We wanted to make more progress with the January budget. Unfortunately, that progress will be delayed, but the foundational eligibility and the foundational base programs will not be cut. Let me be specific. We made great progress last year to deepen subsidies for the middle class, people earning four to 600% of federal poverty. That’s families earning up to $150,000 in deepened subsidies. No state in America provided deeper subsidies, any subsidies, frankly; most provided none, these kinds of subsidies into the middle class. We’re not going to walk away from that program, nor are we going to dismantle the supports and eligibility and the expansions that we had already put into place. However, there are areas where we clearly can’t do what we wanted to do. Keely will talk a little bit about that with Prop 56, which may not mean a lot to those watching. It’ll mean a lot more to those that understand the reimbursement side of things in some other programs that clearly we’re just not in a position to do.
Gavin Newsom: (42:05)
But those again, can be triggered immediately back with the support of the federal government. And don’t think for a second I’m not going to keep coming back to that, including before I end this presentation. So foundationally, as it relates to public health, we’re going to keep the system intact. Now I say that not naively. There are areas where we’re going to have to defer, and there are areas where we will delay. And there are areas that are part of that 26% in cuts, but foundationally in terms of the eligibility, foundationally in terms of those expansions we had already put into place, we’re going to hold the line. The subsequent expansions, we unfortunately are not in a position to do at this moment.
Gavin Newsom: (42:51)
So, that’s public health. Public safety, yesterday I laid out, in very detailed and prescriptive terms, the commitment we have to public safety in this state. And remember, public safety for us is broadly defined. Certainly it’s police and fire, public safety defined clearly by our corrections system and our reentry programs and the like. Yesterday we tried to break down the concerns that many have and expressed privately, many publicly, that we’re walking right back into wildfire season. And what are we going to do to address wildfires? We’re trying to put out the fire of the spread of coronavirus. We, I think made clear to all of you that we’re not walking back from our responsibility to keep you safe, to do many things at once, not just two things at once. You saw that there’ll be enhancements in terms of the number of CAL FIRE personnel. We still don’t have the people and the equipment we need in this state, with the hots getting so much hotter and the drys getting so much drier, to address climate change and address the reality of wildfire management.
Gavin Newsom: (44:02)
We’re doing a historic amount of vegetation management. Prescribed burns, we talked about that yesterday. We had 35 high profile projects, 34 are done. The last one will be done in seven days just off highway 17. We are continuing to do our part, the investor on utilities, including PG&E having to do their part, and I highlighted their obligations on hardening and undergrounding, the work that the public utility commission is doing on creating this whole new division on wildfire safety and the commitment in this budget to get that division up. We’re not going to delay that; it’s too important. 106 individuals, $30 million build that division to hold our investor on utilities accountable, PG&E included, to making sure they’re keeping you safe and mitigating the concerns around these power shutoffs, the PSPS. So, we put out all of that yesterday. It’s a point that we are emphasizing here today, public safety includes protecting people from wildfires.
Gavin Newsom: (45:02)
And know that we have now a more robust capacity to do it than even a year ago, still a lot of work to do in this space. Closing, we talk about people, people being hit the hardest by COVID-19. And I just want to again, make this point. I talk in terms of a state budget where people obviously are dealing with different challenges as it relates to their own personal finances. The reality at the end of the day is we need to do more to help individuals that are struggling and in need. We talked about unemployment insurance, 4.6 million people that tragically have found it necessary to have unemployment insurance. Three point… Well, forgive me. Those numbers reflect a substantial increase again, versus what we’ve seen in the past that require of us a responsibility to meet the needs, not just in the short run, but the long run.
Gavin Newsom: (46:11)
And that’s why in this budget, his desire to bring down some $43.8 billion to continue to provide unemployment insurance and PUA support; that’s the Pandemic Unemployment Assistance for people that are self employed in the gig economy. So I want folks to know, we’re not walking away from our commitments there and our desire to continue to do more in that space, recognizing that this is a multiyear responsibility. And so we are looking to architect our solutions, again, over a multiyear period and making sure that the unemployment insurance system has the resources that you deserve. Accordingly, we want to make sure you have the resources you deserve, particularly as it relates to working families, people that are able to go back to work, but are struggling. We’re not going to touch the earned income tax credit, putting $1 billion in the pockets of working families, working poor, people struggling to get into the middle class.
Gavin Newsom: (47:09)
And I believe it’s incumbent upon us from a moral and ethical, but also an economic paradigm to continue to support that program without any cuts. We also… And that, by the way, provides up to $1,000 for individuals with children under the age of six. We are committing to doubling down on that cause. Accordingly, we want folks to know that we’re not going to touch the grant enhancements for CalWORKs. We worked hard with, again, Senate leaders, assembly leaders to increase Cal Grant supports. We increased the Cal Grant upwards of 23% last year. We’re not going to cut that base in this budget, at least I’m not proposing to. We’ll hope the assembly concurs on that. Again, if we’re going to protect people, protect the PUA program, protect the Unemployment Insurance Program, protect the CalWORKs program, protect the ability to do more on EITC.
Gavin Newsom: (48:08)
And so we want to advance those in a very public way and also remind people we’re not going to touch the Cal Grant program either. We did enhancements for mothers, fathers with kids that wanted to go back to school. There was some conversation about pulling back that program; I just feel like that’s exactly the kind of program we need at this time. Again, it’s just another proof point, I hope, on our commitment to addressing the needs of individuals, not just dealing budgetarily with our broader needs. Let me sum up here, quickly. Also recognize this: you can’t have a conversation about budget deficits, and you can’t have a conversation about sacrifice unless you lead by example. And I want folks to know that none of us in state government will be immune from tightening our belts and committing to help the cause and help support those most in need.
Gavin Newsom: (49:08)
And so we’re asking, across the board, for 10% contribution in wages. We’ll be negotiating and bargaining with each bargaining unit in the state of California. I know this is the last thing that our partners want to hear, but unfortunately we’re in a position where it’s required of all of us. And by the way, including me and including my entire staff. We’re looking for additional 5% efficiencies in sectors of government across the board. One thing about this pandemic is that it’s opened our eyes to possibilities that we may never have seen even three or four months ago. We talk about work many of you are doing from home and the telework, how the boomers generation is now experiencing the zoomer generation, how we are engaging differently than we ever have, conducting business, exchanging commerce differently than we ever have in the past. Government is operating accordingly.
Gavin Newsom: (50:09)
Just thinking of the DMV, just the DMV alone. Well, we estimate 97% of the transactions are virtual now in the DMV. The ability to reimagine the DMV conversations that we’ve had for years and years now, with the Zen Buddhist beginners mind, you start to think a new about how we can advance those reforms and do things a little bit differently. We still need the field offices, but we can do a lot of the work very differently than we have in the past. We also can do without as many cars, without as many cell phones, without as much in our travel budget, conventions, all of that. We’re going to tighten our belt across the board. We will find a [inaudible 00:17:53]. You deserve a leaner government that’s more nimble, more effective and targets the needs of the most vulnerable. And we are committed in this process to giving you that and finding solutions and new strategies to conduct our business and ultimately to advance our collective cause.
Gavin Newsom: (51:11)
And not least of which, I’ll just make the point with higher education, not just K through 12 education, the ability to utilize distance learning, to utilize online resources very differently than people even imagined, again, just a few months ago. These present themselves as opportunities, and also challenges because change is difficult. And I recognize that, but we are committed to advancing that change; we are committed to being more efficient and more effective as we move through this as well. So across the spectrum, we’re trying to meet this moment as so many of you are compelled to meet this moment in your private lives. We are committed to advancing our values, and we recognize these cuts are devastating to so many people. None of us are naive about the challenges in front of us, and I just want to extend a point of personal privilege and appreciation to the legislature.
Gavin Newsom: (52:06)
They’re back in session. We have a very short period of time to make very difficult decisions, work together in a collaborative spirit. And I want them to know, I want you to know of my commitment to them again, not to be an ideologue, to be open to argument, interested in different approaches, different strategies. The Senate just came out with a number of very interesting proposals, and I want to just thank them for their ingenuity, for their willingness to communicate those, not just privately, but publicly. I want folks to know we’re not infallible. We don’t have exclusivity on the exact right path. That’s part of the dialectic part of the conversation, back and forth. And so I’m really pleased the legislature is back in session. I’m very grateful for the two leaders in the assembly and the Senate, Tony Atkins and Anthony Renden. I’ve been in consistent and constant contact with both of them throughout this pandemic. Couldn’t be more humbled and more grateful for their leadership and their stewardship, not only their caucus, but in terms of advising and counseling us to get to this point. We’re going to need their strong partnership moving forward. The budget chairs, Phil Tang, Holly Mitchell, thank them for their guidance and counsel in broader caucuses, Republican, not just Democratic caucuses. Let me thank them in advance for their contribution to this process. Again, very short period of time, enormous amount at stake and multi-year approach, and we’ll get through this. And we will get through it, and we will get through it stronger, more nimble, more capable, more resilient than ever. We are not in a permanent state. We are in a state of constant re-imagination, and I couldn’t be more proud to be governor of a state that prides itself on reinventing itself and re-imagining the future, not just re-imagining the future, manifesting a brighter future, one where we’re not just growing, but one where we’re growing together.
Gavin Newsom: (54:07)
And in that spirit of growth and inclusion and health, we submit this budget. And we do so final words, with a recognition that the enormity of task at hand cannot just be born by a state. The federal government has a moral and ethical and economic obligation to help support the states. After all, what is the point of government, if not to protect people and their safety and the wellbeing of citizens? This is an opportunity to make real our purpose and advance our values. It is not just the state of California and its governor that is making an announcement along these lines, it’s governors all across this country. The federal government, we need you. These cuts can be negated, they can be dismissed with your support. This is your moment. I want to thank again, incredible leadership of Nancy Pelosi. And I encourage my Republican friends, those on the other aisle in the Senate, to help support the states, help support the cities, help support counties, help support America and Americans.
Gavin Newsom: (55:28)
The Hero Act is the best approach. Everything is negotiable. I’m not naive about that, but the opportunity to move forward and to make real the values at a federal level will help us make real and visible the values here at a state and local level. You want to protect firefighters, support that effort. You want to protect our police officers and sheriffs, protect them by supporting that effort. You want to protect our nurses and doctors, protect them by supporting those efforts at the federal level. You want to protect our kids and our teachers, let’s support what Nancy Pelosi is doing. Let’s support that federal appropriation. And if we do, that will soften the blow and give us that pathway to get back on our feet much quicker and help grow and once again, support the economy as we have supported the recovery of this nation more than any other state over the last decade. Thank you; now I’m happy to take any questions.
Speaker 3: (56:37)
Hi governor, public health officials on the frontline of this pandemic say despite the deficit, it’s imperative to invest millions more in ongoing public health funding for counties across California. They’re asking specifically for 150 million ongoing annual money, and it looks like your budget has, of a small fraction of that, about 4.8 million. So, there’s big concern that without a greater investment, the state will be ill prepared, not only in the coming months, but for the next disaster, the next crisis that the state can’t anticipate. So, are you open to that conversation? What do you say to those concerns?
Gavin Newsom: (57:13)
Federal government, support the heroes act. Nancy Pelosi has put out a pathway, a strategy to help support half a trillion dollars to states, to help support, with close to half a trillion dollars, cities and counties that substantially answer that question very specifically. State of California, as large as we are, nation’s fifth largest economy when we came into this. $3.1 trillion [inaudible 00:57:37], simply cannot do all that is needed at this moment. We need the federal government, we need the federal support. And so working together, I’m confident we can get that support, and that will substantially address that concern.
Speaker 3: (57:51)
One final question governor, from me. A few months ago, you were very excited about a historic investment and transforming the state’s Medi-Cal program and investing a large amount of money in combating homelessness, expanding behavioral health, mental healthcare. And I see in your budget that it looks like you’re postponing, the CalAIM initiative. Can you specifically explain… Is the state still pursuing the federal waivers that are critical to that effort? What is going forward, and what’s on the back burner for now?
Gavin Newsom: (58:26)
CalAIM, and forgive folks that are wondering what are we talking about. It was a $ 695 million proposal. We worked on it for about a year; it was the centerpiece of my state of the state. This is one of the proposals in the January budget that we have to pull back, just the reality of the moment. That said, it’s also one of the proposals that’s triggered if there’s support from the federal government to go forward. Again, foundational in terms of our efforts to address the needs to continue to move forward, to integrate physical and brain health in the state of California. We talked about it as a once in a generation opportunity. Look, I just got here, it feels like years, but it’s been less than a year and a half as your governor. The next few years, I hope to be back in a position where not only we get the federal support, we can jumpstart those efforts.
Gavin Newsom: (59:14)
So, we’re not going to walk away from him. Still enormous amount of work will be done on them, but without, unfortunately, the kind of resources that would have helped compel them further and faster. That said, that was a 1915B waiver, you asked a specific question. We will, yes, pursue our traditional 1335, 1115 waivers, forgive me, which one is relevant in that case. But we will continue to pursue waivers and the more traditional type under the whole person care construct.
Gavin Newsom: (59:44)
Again, that may mean something to a few folks. Most of you may be more confused by that except to say, we will continue to move forward to do justice to those base programs, protect those base programs and protect those most vulnerable. I want to continue to reinforce, we’re not walking away from our commitments to reform our healthcare delivery system, to do more on prescription drugs, to draw down costs as a single purchaser, leveraging our [inaudible 01:00:13] power, continuing to do more to integrate behavioral health and brain health and physical health, even if we don’t have the capacity under CalAIM, there’s still a lot in that reform space that we’re not walking away from.
Jeremy White: (01:00:31)
Okay, governor, Jeremy White with Politico. Can you hear me through the mask? Great. So, assembly budget leadership has suggested they may need to seek new revenue this year. A lot of local leaders, the mayor of San Francisco and others are really looking to this split role ballot proposition to help them stave off potentially the worst in cuts to local services. You’ve talked a lot about the additional revenue we’re going to need from the federal government. Particularly if that revenue doesn’t materialize, and even if it does, do you see potential areas for more revenue, including this split reformed to Prop 13 that a lot of local leaders are asking for?
Gavin Newsom: (01:01:04)
Yeah, well look, there are many, many different proposals out there. That is perhaps the most important of all the proposals, and obviously it’s the proposal that marks consideration of everything else that is being advanced. So, I’m very mindful of that, not surprisingly, but I’m also mindful of this moment to consider all the other proposals in and around that proposal that are coming to the fore, including multiple proposals that came out of the Senate just a few days ago, other assembly leaders that have ideas, and then economic recovery task forces large and small. Ours, as well as local and regional taskforces that have their own ideas in that space.
Gavin Newsom: (01:01:44)
We made it very clear, take a look at the introductory letter in the May revise that I provided that we are considering revenue acceleration strategies, we’re considering other approaches, including other revenue strategies, but all of that has to be put in context and all of that has to be considered against proposals that are currently on the table. So, the answer is yes, we will pursue conversations with the legislature leaders all up and down the state, and we hope we can help guide some consensus about what is most appropriate to put forward to the voters this November.
Laurel Rosenhall: (01:02:28)
Hi, Laurel Rosenhall with CalMatters. There’s been a lot of different categories of cuts and categories of funding, and so could you just please detail what are some of the highlights of the things that are in the category that could be reversed through the federal action you’re talking about? And then, how would you respond to criticism that’s basically playing politics with those people who would benefit from those services by making them subject to this leveraging the federal government?
Gavin Newsom: (01:02:56)
I’d rather give people the hope that we care enough about these programs that we’re not going to cut them without considering ways of obviating the need to cut them. I don’t know if that’s anything but principle, and the extent that we’ve done that for 26% of the budget solutions, we have, but not every single thing is in that category. CalAIM is one of them. They’re in the category, a lot of work that we want to do and criminal justice reforms and there are series of things, and you’re going to have the opportunity to go through every single line item in detail in a moment when Keely comes up with her presentation. But I think under the circumstances, it’s appropriate considering the magnitude of the shortfall and having a trigger language that again is written into the budget act. I hope it gives people some optimism and hope. Same time, it’s a balanced budget. Constitutionally, it has to be a balanced budget.
Adam Beam: (01:03:51)
Hey governor, this is Adam Beam with the Associated Press. Your Medicaid, Medi-Cal budget includes eliminating a proposal that would expand coverage to sick people 65 and older living in the country illegally. It would also eliminate expansion of some of the disabled residents between 123 and 138% of poverty. I was just curious how you justified these cuts in the middle of a pandemic, including given that these are some vulnerable populations.
Gavin Newsom: (01:04:22)
Well, they’re not cuts. That was an enhancement in my January budget that we proposed. And unfortunately, we don’t have the resources to expand that program in particular. So in that respect, that’s just one of the many things that we wanted to do that I announced at least my support and intention in January that unfortunately we’re not in a position at this time to advance the core programs in the Medi-Cal programs, those expansions that were well underway. The work we did to put back the core construct of the Affordable Care Act, the work we did during this pandemic with credible leadership of Peter Lee to expand the number of people that have enrolled on to Covered California, that foundationally will continue. And we’re proud of that, and we believe that is absolutely justifiable.
John Myers: (01:05:14)
Governor, John Myers from the Los Angeles Times. A couple of things really quickly I want to clarify. On the school funding, it’s a pretty substantial, quite substantial cut in Prop 98 funding from what you envisioned in January, and it looks like you are not funding schools in the 2021 budget year, the one that you’re rolling out, at a level that even they thought would maintain current services. And some of the early reaction is that cuts of these magnitudes simply won’t let schools reopen under the conditions that exist. What do you say to that fear?
Gavin Newsom: (01:05:44)
Well, I say there’s been a pandemic that has precipitated a 22.3% reduction in revenue in just over 100 days, completely unanticipated. I say to them, none of us expected this moment. As you know John, I announced I believe it was here in January-
Gavin Newsom: (01:06:03)
… announced. And I believe it was here in January, a record investment in public education. That was the budget I put forward. You are correct. The Budget Act last year was 81 point $1 billion. The current projected investment in that budget is $70.5 billion. That represents about a 13% decline from what was approved in the Budget Act. So no one’s been hiding that, it’s a very challenging moment. And that’s why I want folks to know that we’re using CARE Act dollars that gives the state discretion and putting $4.4 billion into our education system to answer the concern that you highlighted specifically.
Gavin Newsom: (01:06:43)
To provide flexibility and to provide funding that directly can address learning loss and provide the kind of flexibility through the summer and fall that can meet the needs of the system. As we work together to address the need, to get the federal government, to continue to do more for education, not just here in the state, but across the country.
Speaker 4: (01:07:04)
Quickly could I ask you just in terms of your revenue projections. What is your team telling you about how much worse this could be? There was a lot of discussion the LAO has talked about a U-shaped curve or an L-shaped curve. There’s a lot of discussion. It could be worse than maybe what you’re assuming. What’s the outlier? I mean, is there the potential for significantly bigger pain? I know the answer to that is yes. But what can you tell us about what they’ve been telling you?
Gavin Newsom: (01:07:30)
Yeah, I mean, it certainly is yes. We’re very sober about all of this. By the way, I should just note, as of today, 19 counties have self-attested. The attestations are up in those counties. 19 now are moving deeper into the second phase and reopening large sectors of their economy. I’ll remind people that 70% plus of the economy, many parts of the state now are reopened manufacturing, warehousing logistics in very large number of places now back operational.
Gavin Newsom: (01:08:05)
Again, conditioned on modifications. No one’s naive about that. So we’re doing what we can to move forward as we committed in that space. That said, these unemployment numbers are jaw-dropping and you’ll see some numbers that we put forward in the budget presentation or the budget package that we provided you and the materials we presented, that show if the economic conditions do not improve, possibility of seeing north of 30% unemployment presents itself as an outlier prospect.
Gavin Newsom: (01:08:40)
So that’s specific an example of what I’m being told and I am sharing very formally with the public in terms of the economic consequences that we’re all facing across this country. You saw the new unemployment numbers that just came out nationally, those still lag. Those numbers just reinforce this has not spared any of us in any part of the country.
Gavin Newsom: (01:09:05)
The concern we all have is reopening doesn’t mean much if customers don’t feel safe and customers aren’t running to spend again. And that’s why this is a very stubborn reality that we are living through. And that’s why we have to be always mindful of health and the economy, not health or the economy health and the economy. Sooner we can make people feel healthier, the sooner our economy will start opening up at full throttle, not just modest phase. And so that’s my hope and expectation that we could continue to tame the spread, suppress the spread.
Gavin Newsom: (01:09:45)
I should note that we saw 2.2% reduction yesterday in ICUs. We saw unfortunately a 1.2% increase, a modest increase in hospitalizations. Forgive me, those two numbers are flipped, but you get the sense again, we’re within that margin sort of bouncing around stable, but still not where we need to be. Over 2000 additional people tested positive yesterday as well.
Gavin Newsom: (01:10:12)
So again, all of these things got to address this issue of COVID-19. Continue to work hard on that as we work to reopen this economy and address the budget anxiety that clearly is manifest in the presentation today.
Nicole Nixon: (01:10:27)
Hi, governor Nicole Nixon with CapRadio. Some Republican senators have indicated that the HEROES Act is essentially a nonstarter given the price tag. So should Speaker Pelosi propose or negotiate a smaller relief package. Isn’t it better for States to get less than what’s proposed than nothing at all?
Gavin Newsom: (01:10:45)
You’re talking about Speaker Nancy Pelosi and I can assure you, she does nothing without consideration of how to actually get something done. She’s one of those leaders that doesn’t just get it, she delivers. And so she knows what she’s doing. She’s not naive to those calls and the consternation that you’ve expressed across the aisle around concerns, deficits, and costs. But she is also, I thought very forthright and honest when she says the cost of not doing something will bear out in longer economic pain, longer term recession and suffering.
Gavin Newsom: (01:11:28)
And the biggest mistake we can make is not taking seriously this moment and magnify the opportunity to mitigate this moment by diminishing the time to getting back on our feet, by focusing on the needs of getting our cities and our States going again. What is the national economy if nothing more than the sum total of state and local economies? A federal vision is not realized in Washington DC. A federal vision is realized at the local level.
Gavin Newsom: (01:12:01)
And so at the end of the day, if we’re serious about economic growth and getting this nation open again, then we must be serious about getting States and cities off the mat and back up so that we are moving again. And that’s why I have confidence in Speaker Pelosi. And I’m not naive that where she starts is exactly where she’ll end.
Sophia Bollag: (01:12:27)
Hi, governor. Sophia Bollag here from the Sacramento Bee on the topic of the increased costs in this May revision related to COVID-19. You said last week that you were going to direct your state agencies to expedite and releasing the contracts that outline those costs. But my colleagues and I still have not gotten many of the ones that we’ve requested. We’ve been directed to go through public records doc requests, which are taking weeks.
Gavin Newsom: (01:12:53)
Well, let’s fix that. I’m going to fix that. And I’m going to make that crystal clear publicly, and to them, we’ve got to get those released. So that’s going to get fixed.
Sophia Bollag: (01:13:01)
Will you commit to posting them on the state’s contracting website or to other state websites?
Gavin Newsom: (01:13:06)
I’ll defer to what’s appropriate in that space, but as it relates to being able to access that information, certainly have the right and look forward to getting that information out as soon as possible. And candidly curious which ones haven’t been yet, and we’ll make sure we get those done.
Katie Orr: (01:13:22)
Governor, Katie Orr KQED News. Two questions for you, one a process question. Are you anticipating having another budget process in August after we actually get our tax revenues in from the July 15th tax deadline and also on environmental protection, can you comment on that?
Katie Orr: (01:13:41)
You’ve had to make some cuts in that area and it comes at a time when federal support is basically absent for those. And a lot of people are looking to California as a leader in that area.
Gavin Newsom: (01:13:50)
Yeah, we’re going to try to do as much as we humanly possibly can. Do as much to continue to preserve those core programs in our cap and trade program, $125 million, I believe, or 65 million, 965 in the budget. And you saw our categorization of prioritization in that respect. Safe, clean drinking water, air quality, and disadvantaged communities and efforts on forest management, wildfire management as being those core frame of focus.
Gavin Newsom: (01:14:18)
So it goes deep into that zeitgeist of the frame of California doing more in this space and continuing to protect and preserve our gains in this space as we continue to litigate and win overwhelmingly in the court of law, including a big victory last week. And so look, we can do as much as we can. Like to be able to do more, but foundationally, I think we’ve done justice in this budget in terms of protecting those as core regulatory constructs as we can.
Gavin Newsom: (01:14:49)
That said, look forward to the give and take with the legislature and any augmentation, perhaps that’s needed or any blind spots that our administration put out. And let’s try to fix those as quickly as we can.
Alexei Koseff: (01:15:01)
Hi, governor Alexei Koseff from the San Francisco Chronicle. Your budget proposal mentions trying to save money by closing two state prisons over the next two years, has your staff identified which sites those would be? And are you expecting a permanent reduction to two prison population levels because of something that’s occurred during this pandemic?
Gavin Newsom: (01:15:24)
I don’t know if there’s anything specific outside of this pandemic specific in terms of the permanent reduction, we’ll see. It’s a fluid and dynamic as it relates to intake and number of people in and out of the system. Look, as it relates to the prisons, I made a commitment when I ran for office, I made a commitment last year, I made a commitment again in the January budget. That’s my intention to shutdown state prison, to continue to invest more and more in education, core value back to that value statement and the value slide that we advanced.
Gavin Newsom: (01:15:59)
We’re not walking away from that in this budget. We haven’t made the determination of the specific sites and respectfully, if we had, I caution those that want to highlight that it becomes very difficult if you do make that determination to make it public, to recruit, retain personnel at that site. It could create all kinds of problems.
Gavin Newsom: (01:16:20)
And so I caution people to even those that speculate what those sites may be to consider that. It’s not your responsibility to do that, but it is my responsibility to govern and manage, and try to do so as effectively and efficiently as possible. And so we don’t identify the specifics and truly in candidly we’re negotiating that. And so we have not made any of those determinations.
Gavin Newsom: (01:16:40)
One thing I have though made is determination, not just to shutdown those prisons. But I also have committed to working other prison guards unions, and others on the reforms that we laid out in January. And I want folks to know we’re not walking away from those reforms specifically, as it relates to re-imagining one of our state prisons and making it a world-class, second to none example of rehabilitation at scale.
Gavin Newsom: (01:17:06)
There was a specific proposal I laid out in the January budget. We are committing ourselves and I’m hopeful we’ll have concurrence with the legislature to advance that proposal. I think it’s incumbent upon us to do more and better in the rehabilitative space. And we’ve had a wonderful collaboration with the leadership of the union. That’s willing to work with us. We still have a lot of issues in this space and I don’t want that momentum to go away. And so we want to commit to advancing that. And that’s not going to be deviated from at least in the context of the presentation and the proposals we’re putting forth to the legislature.
Gavin Newsom: (01:17:47)
Look, I’ve spoken enough. I’m grateful for all the questions. I’m grateful for any of you that are stuck through this presentation that are still with us. I again, want to just express my deep, deep appreciation to the people of the state of California, and also just express my deep respect for the struggles for all that you are asked to do and are working through at this moment.
Gavin Newsom: (01:18:15)
It is my responsibility as the governor state of California to submit a balanced budget. But I do so soberly with a recognition, not only of the impact of this budget on the lives of those that otherwise would be beneficiary of the budget, but an impact in terms of getting this economy moving again.
Gavin Newsom: (01:18:33)
One thing we did not highlight in this budget is our commitment to small business, our commitment to providing more loans and more resources to minority women-owned businesses that otherwise fall through the cracks, and SBA loans and the PPP program. We are committed in parallel to working with the legislature to fast-tracking bonds that have been approved, but haven’t been sold to strategically align those bonds to transportation investments and work region to region, to work locally, to amplify their efforts from an economic recovery of perspective.
Gavin Newsom: (01:19:06)
I’ve got a wonderful task force that’s coming out with advice and coming out with recommendations on a consistent basis. That will also be part of the conversation as we move this budget forward. And clearly it was part of the conversation that the Senate was having with their presentation. I know the assembly is doing the same. And so it’s a way of saying this.
Gavin Newsom: (01:19:28)
We want everybody come together. We want everybody in the spirit of collaboration and cooperation, put their ideas on the table and know that we’re not going to dismiss any idea out of hand. We want a government to be considerate, thoughtful, and collaborative. That’s my commitment to the legislature. That’s my commitment to the people of the state of California. But I cannot make this point enough. And I’ll end once again, by reinforcing it.
Gavin Newsom: (01:19:56)
This pandemic is bigger than any one state. It’s bigger than any nation. It’s a global pandemic. That GDP number I showed you, we have never seen anything like that in our lifetime. The conditions that have presented themselves because of this health crisis have manifested in this economic crisis. The magnitude of what we are asked to do is very, very significant and that’s why the federal government is so important.
Gavin Newsom: (01:20:25)
Foundationally, that’s the purpose of the federal government. Protect us, public safety and protect the wellbeing of people. Individuals have seen their savings depleted. They’ve seen their credit rating torn apart. We’re doing our best to help support people in need, but we now need the federal government to help support not only the state of California, but other States across this country. If they do, if they meet that moment, we will be able to significantly reduce the stress and the anxiety that many are feeling individually. And those that have the benefit of supports from the state.
Gavin Newsom: (01:21:03)
And we are hopeful that will be a successful endeavor. Even one as challenging as the one the Speaker has put forward. This is a multi-year responsibility. We can’t solve everything overnight without catastrophic cuts that are simply too much to bear. But we have put out a blueprint to balance the budget this year and to strategically move forward collaboratively, to reutilize our reserves, utilize our capacity to deliver a very thoughtful multi-year strategy to get this economy back on its feet and to help obviously get this budget back in to the category where we left off as early as January.
Gavin Newsom: (01:21:52)
So with that, I will leave you with a more capable budget hand, and that is Keely Bosler who runs our finance team. And I would be remiss if I did not just thank her and thank her credibly talented team. There’s nothing more challenging for people doing this kind of work than figuring out what is the best approach. None of them are enthusiastic about every decision that’s being made because they recognize the people behind the numbers.
Gavin Newsom: (01:22:28)
But I think they’ve done a magnificent job, always with the eye of equity, the lens and protecting the most vulnerable to put out a blueprint today. And again, their values speak loudly and clearly, and I just want you to know the value I have in Keely’s leadership and our team’s leadership. And I want to thank them for the incredible credible work they’ve done to date and all the hard work we have to do together before July 1st. With that, I’ll ask my finance director to come up.
Keely Bosler: (01:22:56)
(silence). Good afternoon. It’s a pleasure to be here with you today. I first I want to thank the governor for that very gracious thank you. And I also want to give a second thanks to my team at the Department of Finance, putting together a budget that’s really so radically changed from our January outlook and under far different conditions that I know we’re all faced with right now given the pandemic.
Keely Bosler: (01:24:14)
I was going to go ahead and I was advised to say to the press corps that’s here today that we’re going to go in the same order, but I was going to go into more detail about what’s in the trigger reductions. I think that’s probably one of the areas you’re going to want to understand better. I can go into more detail about the pullbacks or the canceled expansions as well. Those are a little bit more self-evident. There’s a lot of new expanded programs that were proposed in January and across the board.
Keely Bosler: (01:24:42)
Those are for the most part pulled back, but I will start with actually with education. Which the governor did go through quite a bit, so I’ll spend less time here. But I’m just want to highlight that it equates the funding at the constitutionally required level does end up with a $15.1 billion funding shortfall that that needs to be solved for. And so that is done through a variety of things.
Keely Bosler: (01:25:17)
We talked about, the governor talked about the deferrals, but also we are proposing a 10% across the board reduction to the local control funding formula. And in addition, there’s a reduction to the categorical programs, excluding special ed. Special ed is prioritized of about 353 million. I did those. I did the deferrals. Those are the main categories there, as well as the use of the public safety, the public schools stabilization account as well.
Keely Bosler: (01:25:58)
And then in addition to help to offset the impacts of that reduction, that $15.1 billion reduction, we have 4.4 billion in federal funds that are discretionary. The governor could direct that we’re sending for learning loss and mitigation. 2.3 billion, I think there was some confusion about the CalSTRs and CalPERS. This is the 2.3 that’s remaining of the 3.15 billion, which was a supplemental payment that the state made on behalf of school districts.
Keely Bosler: (01:26:32)
2.3 billion is remaining that was planned to be used for reducing long-term liabilities, given the significant shortfall where we’re proposing to redirect that supplemental payment to help alleviate school budgets in the budget year and budget year plus one. And we actually split that 2.3 billion over the two years, about a billion being used and the budget year to reduce payments that the school districts have to make to [inaudible 01:27:01]. So there’s no change in the obligation of the underlying payments. It’s just those supplemental payments that we’re proposing to redeploy in a different way.
Keely Bosler: (01:27:11)
And then finally, I think the governor did a very good job walking through the new obligation for K-14 schools that would be on the non-98 side. It would actually be up to $13 billion over the forecast period. And it would be one and a half percent of the state appropriation limit revenues. And at the end of the forecast period under test one, because we assume that the Proposition 98 guarantee is in test one over the entire forecast period.
Keely Bosler: (01:27:39)
The share of funding to Prop 98 would increase to 40% of the state’s general fund. Talk just a little bit about higher education. Obviously in January, we proposed 5% augmentations to both of the segments. Those have been pulled back and we are proposing in the trigger if federal funds are not provided, an additional 10% base cut to both UC and CSU.
Keely Bosler: (01:28:11)
The community colleges would also see a 10% reduction within Proposition 98 to the student-centered funding formula, that represents about 593 million. We are proposing a billion, approximately a billion dollars worth of deferrals on the community college side as well. And then we are also proposing similar too on the K-12 side, a reduction really across the board to many of the categorical programs that exist in the community colleges budget, including the Strong Workforce Act, which we had made major investments in, in the January budget and bringing that down to a 100 million.
Keely Bosler: (01:28:56)
Again, the priority in higher education was to preserve the eligibility in the Cal Grant program so that those people who are out of work can go back to college. We are also planning to work with all of the higher segments, higher education segments on really capitalizing on all of the good work that’s been happening in all of the segments in distance learning and really perfecting and experimenting with new ways to do that.
Keely Bosler: (01:29:28)
CSU obviously made a big announcement this week about their posture going forward. But we really think that this distance learning and online learning will never take the place of in-person classroom learning. But it is really important, a way to get at populations who are working, who have children at home to be able to meet their educational goals through working out at night and on the weekends in a more flexible way.
Keely Bosler: (01:29:58)
And so we hope to work with all of the segments on a common platform that will allow students to get their general education so that they can then make transfers to CSU and UC and continue their educational path. There’s also going to be a need to continue to work on distance learning, to improve reskilling and retraining individuals as the composition of jobs change over the next coming years. And we’ll be working with the segments to do that as well.
Keely Bosler: (01:30:31)
In the health and human services area as the governor very clearly emphasized, we are prioritizing maintaining eligibility for all of our major entitlement programs. We are also preserving the grant levels at their current levels for CalWORKs and SSI/SSP. Some of the reductions I’m going to highlight that are in the trigger. Again, these are all subject to, would be only implemented if additional federal funds are not provided, are eliminating a number of optional benefits in the Medi-Cal program.
Keely Bosler: (01:31:10)
This includes community-based adult services, as well as reducing adult dental from its full optional benefit to the partial dental benefit as well. We are also proposing to redirect the Proposition 56 revenues that have been used for the last couple of years for supplemental payments to providers. We are now proposing to withdraw those and fund Medi-Cal growth directly. So that’s an additional 1.2 billion less for supplemental payments.
Keely Bosler: (01:31:51)
In the area of CalWORKs, the priority, this is an area of the budget where there’s a significant increase in caseload, which is exactly how it’s supposed to work. Our TANF program is still designed to work to adjust to the economic conditions and the needs of people. But because of we wanted to maintain the grant levels at the current level, there is a significant reduction to employment services and childcare and subsidize employment, which are all services that are funded, that have been funded to support persons on CalWORKs getting back to work.
Keely Bosler: (01:32:38)
In the area of in-home supportive services, in the trigger, there is a 7% reduction in service hours to IHSS recipients. Again, maintaining eligibility in the medi-Cal and IHSS program was the priority. On SSI/SSP, we are maintaining eligibility and grant levels, and we’re also maintaining the important CalFresh eligibility that was extended to SSI recipients in the last budget. That is another item that we are continuing to maintain there.
Keely Bosler: (01:33:14)
We are though not passing through a federal, a new federal COLA. So maintaining the current levels. In the area of developmental services, we have an approximately $300 million reduction to rates, but we also want to put together a working group that will look broader than just rates, cost sharing, utilization reviews, and other efficiencies that the DD system can achieve to help to mitigate the impacts on consumers and to address equity issues as well.
Keely Bosler: (01:33:56)
In the area of corrections, we talked a little about closing two prisons. That is what our current estimates of population will allow. The budget maintains rehabilitative programs in the governor’s budget. It does pull back the expansions that were proposed in January, but the base rehabilitative programs are maintained.
Keely Bosler: (01:34:19)
And we’re also proposing some efficiencies within the prison that will achieve additional savings, including reducing the time it takes for the prisons to move inmates from reception centers to mainline institutions, where they start their programming and rehabilitation programs.
Keely Bosler: (01:34:39)
We are also looking to make some changes to good conduct credits that will also provide over time opportunity for individuals to be able to earn those credits and earn release in a more timely manner. We’re also proposing to consolidate fire camps. We plan to maintain the same level of inmate firefighters, but we’re proposing to reduce the number of camps that we have and consolidate inmates on fewer camps for savings. And we’re also proposing to eliminate a few other programs. Some of them that support our parole operation given the state’s budget conditions.
Keely Bosler: (01:35:24)
Finally, a proposal that we have in the budget that is part of really following all of the research about how to improve public safety is we are proposing to cap parole terms at two years for most offenders that excludes some, including sex offenders and inmates who were serving life sentences. There also will be a provision to allow for an earned discharge for most offenders. Parolees, excuse me, at 12 months. And that’s again, earned discharge.
Keely Bosler: (01:36:02)
So based on the activities while they are on parole in that first year. Another proposal we have in the budget, as you will recall last year, there was a decision made the governor and the legislature to move at the management of the Division of Juvenile Justice from CDCR to the Health and Human Services Agency. We are now proposing to a different direction on this, but really in the same spirit of really improving outcomes for the young people who have been committed to DJJ. And doing that, we are proposing to realign this program to the local governments.
Keely Bosler: (01:36:47)
This will happen over time gradually. We will stop intake in the budget year is the proposal. And then the population that’s currently at the state would then [inaudible 01:36:59] out over time. And we would move additional funding to the local governments to support that new operation at the local government level.
Keely Bosler: (01:37:09)
In terms of the judicial branch, the judicial branch also is we are proposing a 10% reduction across both trial courts and the state level judiciary. We are providing them with some additional funding in the budget year to make the necessary changes, to really modernize their court operations. Like the rest of us, they’ve also had to make radical shifts in the way they conduct court business in order to protect the access to justice. And so those monies would help to make those changes more permanently, so that they can continue to focus on their mission of providing equal and access to justice.
Keely Bosler: (01:37:54)
I also want to highlight that there is a budget proposal from January regarding the ability to pay, which was a proposal we put forward in conjunction with the judicial branch to allow for individuals who owe a lot of high numbers of fines and penalties to appeal, to be put on a payment plan, or have their fines and penalties significantly reduced. We propose to maintain that expanded program in the May revision, given the hardship again, that’s facing so many Californians, given the recession.
Keely Bosler: (01:38:32)
A little bit about the natural resources and budget. There were really two big departments within the Natural Resources Agency that have a significant general fund. And that’s the Department of Fish and Wildlife and the Department of Parks and Recreation. I’ll start with the Department of Parks and Recreation. This is a department that’s actually suffering very, very large reduction in their special fund revenues from their fees at their parks. And so given that …
Keely Bosler: (01:39:03)
From their fees, at their parks, and so given that, this budget year, there will be additional funding needed to make sure that they can maintain their services and do all of the other things that they need to make sure that the public is safe given the pandemic. But starting in budget year plus one, so that’s 2021-22, we are proposing a $30 million ongoing reduction to the parks budget, and we propose to work with stakeholders on a plan that addresses equity and access issues, but also works to maintain not having to close parks permanently.
Keely Bosler: (01:39:49)
Fish and Wildlife, we have proposed $33 million reduction in their budget. Again, maintaining some of the proposals that were put forward in the January budget, including continuing to allocate the nearly $20 million from the Habitat Conservation Fund to continue to support the department’s activities as it relates to protecting ecosystem restoration and species, and they’re important public trust work that is primarily funded through the general fund. I then wanted to just turn to the employee compensation that is approximately, again, 10% from current pay levels. And that represents about 1.2 billion in general fund savings in the budget year and 2.4 billion total funds, showing that that’s something that’s also going to apply to departments in the special fund area.
Keely Bosler: (01:40:59)
The other thing I wanted to say about efficiencies, this is an across government exercise and work for all departments, regardless of their funding source. We’ll be looking for a 5% reduction in state operations, is the term of art we use in the budget world, in 21-22. Getting there, we want to make sure that we are making the investments in technology and also reviewing all of our lease space and thinking about restacking existing buildings, so that we can accommodate a smaller footprint where appropriate after analysis by government operations agency working with the departments.
Keely Bosler: (01:41:49)
I will probably end there and then open it up to questions. But, oh, sorry, one other thing. Childcare, we are proposing to maintain access to childcare, and we actually have some expansions for first frontline workers that are in the budget, but there are 10% rate reductions for both the centers as well as the family childcare homes. Those are also in the trigger cut. So if federal funds are available, we would not do those triggers. So that’s another sizable reduction that I wanted to highlight.
Keely Bosler: (01:42:30)
And then one other thing, because there was a question on public health, and I think there’s going to be a lot of conversation about public health in the coming months and years. There are a couple of ways, I think mentioned, there’s an augmentation to the State Department of Public Health. There is also 1.3 billion of the coronavirus relief fund that’s being sent to counties to support public health and also other vulnerable communities. So that’s just one thing I wanted to highlight as well.
Speaker 5: (01:43:08)
Keely, just two quick questions. On the MCO, did I hear the governor right that it was 1.7 billion in annual revenue?
Keely Bosler: (01:43:17)
To the MCO tax, yes.
Speaker 5: (01:43:19)
And over what period of time?
Keely Bosler: (01:43:20)
So we assume that it’s extended. It falls off in 23-24. That’s one of the reasons why we have a structural deficit of almost 16 billion in 23-24. There’s a few things happening there, but the MCO tax has completely triggered off by then. I think it triggers off like halfway through 22-23.
Speaker 5: (01:43:42)
And then, on the Medi-Cal case loads, the 14.5 million, can you just talk a little bit about who those people are that we’re expecting to enroll? Have you guys done any demographic or job… Does it correlate with the unemployment claims for example, or any daylight you can provide on that would be helpful.
Keely Bosler: (01:43:58)
Yeah, no. I mean, obviously, the estimating that we’ve been doing on caseloads, we took all of the best information we had at the time when we were putting these together several weeks ago now. And then we were also looking at what had happened in other recessions to get some understanding of the patterns. So I don’t have a detailed demographic analysis. I don’t know, Dr. Galley, if you have more information at this time, but I think in the coming weeks and months, we are working very closely with the welfare directors and getting better on the ground information about what’s happening.
Keely Bosler: (01:44:38)
But the information we had earlier late last month really was CalWORKS caseloads were going up significantly. And we were seeing increased enrollment in Medi-Cal. And then the CalFresh was really an area where there was significant increase in caseloads. And I think that all reflects how difficult this recession has been on working families, families that are in lower wage jobs, because we are estimating that in some sectors like leisure and hospitality, that upwards of half of the jobs have been lost.
Speaker 7: (01:45:24)
Hey Keely, thanks so much. Oh yeah. Sorry. Can you hear me okay?
Keely Bosler: (01:45:28)
Speaker 7: (01:45:29)
Great. Okay. So the $203 billion figure, is that with the trigger cuts or is that without the trigger cuts?
Keely Bosler: (01:45:35)
Yeah, so the cuts are implied in the budget because otherwise the budget would not be balanced. So there’s a federal funding is the preference, but if the federal funding doesn’t come in, then the cuts would trigger by law. So, I mean, it’s an equivalent amount, right? So federal funds or cuts, so I guess you could see it both ways.
Speaker 7: (01:45:58)
So it’s $203 billion. The rest of it is coming from using the [crosstalk 01:46:00].
Keely Bosler: (01:46:01)
Yeah, the 14 billion.
Speaker 7: (01:46:02)
Got it. And then my other question is the governor has been pretty clear as we’ve been slowly reopening the economy that we may need to pull back, move different parts of the state back into phase one. Do you have sort of contingency projections for if say there’s a resurgence and a bunch of businesses have to close?
Keely Bosler: (01:46:17)
Yes. So there’s 1.8 billion in additional state expenditures. I want to make that emphasis. That’s the state general fund component of the COVID-19 response. We also have added an additional 716 million general fund, which we’re calling a COVID contingency. These monies are supporting the array of activities that we’ve been talking about, and the governor’s been talking about. It is his daily press conferences, testing, track and tracing programs, also hotels for medical workers and frontline staff. Also, the procurements of PPE and the necessary equipment, and the other piece is the hospital surge capacity. We have brought up about 5,000 additional hospital beds outside of the hospital’s normal surge capacity, and really working to make sure that we’re calibrating those and making sure that they are available, especially as we move into the fall, when there’s still a lot of concern about a resurgence of the virus and the need for additional hospital capacity beyond what we have. But that’s something that Dr. Galley and Dr. Angel and the entire team at the state operation center are evaluating literally on a daily and at real time.
Speaker 8: (01:47:42)
Thanks, Keely. So the 10% proposed cut to state worker salaries, is that part of the federal trigger?
Keely Bosler: (01:47:53)
Yes, it is. So we were going to be working with our bargaining units to achieve those reductions, but if the federal funding is received, those would not be sustained.
Speaker 8: (01:48:04)
And then what kinds of tax increases are in this? I know a couple weeks ago, the governor said he was going to propose a vaping tax. I’m not sure where to find that in here, so go through state tax-
Keely Bosler: (01:48:13)
Oh yeah. Let’s go through those. Yes. Yeah. There are two new proposals. So that’s the suspension of net operating losses, and that’s about a 1.8 billion, and that’s for three years. The other one is the limiting to 5 million, the amount of tax credits, that an individual or a company can take in any given year. So those two combined, and that’s another $2 billion in increased revenue in the budget year, and that’s also for three years we would be limiting the credits. Those two actually have an interaction when they do the estimates, and so there’s an additional 611 million that is also scored in revenue from the interaction of those two, and that’s because if you only eliminated one, people would use more of another credit. And so it’s just a convention of how they do revenue estimates.
Keely Bosler: (01:49:11)
There are also the e-cigarette, the vaping tax from January is also maintained as a proposal and may revision. So we’re continuing to pursue that. In budget year plus one, we estimate that it will raise about 33 million, and that will be going directly to support the Medi-Cal program in our proposal. And we do also support a flavor ban as well in that tax.
Speaker 8: (01:49:38)
So one more question on the homelessness funding, 750 million proposed for homelessness funding from the federal government, is that funding that has not yet materialized, and if so, what would you do if it [crosstalk 01:49:51]-
Keely Bosler: (01:49:52)
750 million, we are actually proposing to use the coronavirus relief fund, which we have received. So we’ve removed the general fund that was proposed in January, and instead we’re proposing to use the 750 million, but in a different way. We’re now proposing to deploy that funding to actually purchase some of the motels that are part of the project room key, which counties and the state have been working closely together to identify motels across the state where we can move individuals who are in congregate shelters, who are at risk of COVID-19, and move them into these motel rooms. We are in active conversations to work on purchasing some of these motels and then turning them over to the counties or nonprofits for adding to their permanent stock of housing for the formerly homeless.
Adam Beam: (01:50:51)
Hi Keely, Adam Bean from the Associated Press here. You answered the question about homelessness. I had the same question, but also I wanted to ask about education funding. I know the constitutionally required minimum is a really big cut and you’re not going to go that far. Can you just kind of walk me through again? What is the actual cut once you include all the augmentations to try to make some of that up?
Keely Bosler: (01:51:16)
Yeah, I think that bringing the guarantee to it’s constitutionally required level is about a $15.1 billion reduction. And so that is done, we’re doing the deferrals, which are about 5.3 billion, so that allows districts to preserve program. It’s still a hardship on the districts because they need to manage cash and they will probably, in some cases, need to borrow or use reserves in order to be able to do that. We also propose to, again, reduce the LCFF by 10% and then reduce categoricals in half.
Keely Bosler: (01:52:03)
Some of the things that are kind of offsetting that are the 4.4 billion, which is all from discretionary federal funds. So these are not funds that were earmarked in the bills at the federal level for schools. These are on top of that. And so those are monies that right now after today they are, but before, the schools were not planning to see. The other one is redirecting that 2.3 billion that we were using to pay down longterm liabilities and reduce the rate longterm, accelerating that, and giving them a billion dollar benefit in the budget year and and then the remainder 1.3 in the budget year plus one.
Keely Bosler: (01:52:45)
And then there’s the 1.7 billion from the federal CARES Act that’s going directly to schools. All of those things are going to help to mitigate the harshest reductions in the budget year. But again, I think probably more important to schools is looking at budget year plus one, and this additional obligation that we’re proposing to increase the guarantee at a faster rate than it otherwise would under current law.
Adam Beam: (01:53:12)
There’s one other question. When it comes to these cuts, how do you envision school districts implementing these? I mean, are we going to see teacher layoffs or school closures?
Keely Bosler: (01:53:22)
I mean, every district’s in a different position. Some have reserves and some are in better fiscal conditions than others. It’s hard for us, for me, to sit here and explain exactly what’s going to happen. They are very employee heavy, an employee intensive operation, so there will be a lot of hard districts at school district levels. I don’t want to sugar coat that. I do think that the amount of money that we’re providing to offset the reductions will be a significant help, but they’re also in a huge state of flux with having to design distance learning programs and think about how to modify their physical plants to be able to return students safely back to campus. There are a lot of struggles across this budget, including in schools, and that’s one that we had the most concern with when we were building this budget, and it’s why we’ve prioritized so much of the federal funding for that purpose.
Speaker 9: (01:54:29)
Hello, Keely, from a long way away. All right, Keely, let me try this. So on page four, with your figure, your table for the 54.3 in solutions, those are solutions that are in 19, 20, and and 2021, correct? Because that’s the 54.3 [crosstalk 00:15:48]-
Keely Bosler: (01:54:48)
Right. It’s really a two year… Yes. Yeah. Because we have the carrot. I mean, some of the solutions are rolling back things that happened in the current year that have the money that hasn’t been spent.
Speaker 9: (01:55:01)
So at some point, do you think somebody can provide us how to break down the solutions by current year and budget year so that we can kind of see where they are rather than lumped all together? Do you guys have some place somewhere?
Keely Bosler: (01:55:15)
Yeah, I mean, I can try and think through what that would look like exactly.
Speaker 9: (01:55:19)
Asking you to do it on the top of your head here.
Keely Bosler: (01:55:21)
Yeah. Because current year is sort of almost to an end, and you’ll notice… So, I think that the way we think about it in budgeting is just the constitutional requirement is to present and to pass a balanced budget. And so, all of the ways in which we spent more than the SFEU in the current year, have all rolled in and are part of the budget year problem that we have to solve. And so it really is not specific to current year and budget year. I mean, definitely the thing that’s probably driving the most in the current year, our caseload costs, and obviously the COVID-19 related expenditures, but there are some other caseload related costs and other backfill related costs that are also in the current year.
Keely Bosler: (01:56:16)
So I can probably get you some more details about the costs that have gone up in the current year beyond what we projected in January, because that’s certainly something. So these are more on the solution side, what we’re doing, but on the costs, there’s certainly costs that we’ve already are incurring now, and then the budget year projections.
Speaker 9: (01:56:38)
I don’t want to hog my time, but I want to try to figure out two quick, super quick things. One is on that same page, or actually, just trying to understand the amount left for the state from the CARES Act. The [inaudible 01:56:52] estimates it was 9.5 billion. Is your number not that number.
Keely Bosler: (01:56:57)
Right. So this number, the 8.3, is only what we’re using to offset general funds. So this is a budget solution. So the 9.5 from the coronavirus relief fund, we’re allocating in the following ways. We’re allocating 4 billion of that to schools. So of the 4.4, 4 billion is from that coronavirus relief fund. Then we have about 3.8 billion that is for COVID-related expenditures that are on the state general fund, and that we would use the federal funds instead of the general fund. And those are for costs incurred during the COVID-19 pandemic. And I want to be clear about that because the federal rules have been very clear that they cannot be for revenue loss. So it’s not for revenue loss, but it’s for COVID-related expenditures that we have in our state budget that would otherwise be on the general fund, I guess, is probably how I should have phrased that. And then we have 1.3 billion for the county public health, behavioral health, and other health and human services programs, and especially for those counties that did not get a direct allocation from the U.S. Treasury. And then we have another 450 million for cities for public safety and homelessness. All of these funds have to be for expenditures related to the pandemic, and they all have to be utilized by the end of the calendar year. So that’s how we use that coronavirus relief fund.
Speaker 9: (01:58:36)
But I don’t think that adds up to nine and a half, right? So there’s something you’re holding back or no?
Keely Bosler: (01:58:41)
Yeah. 4.4 plus 3.8. I have a table in the…
Speaker 9: (01:58:44)
Okay. Then just super quick before everybody throws things at me. What is the date by which we need the additional federal money or the trigger is the trigger, I mean, what’s the drop dead date for Washington here?
Keely Bosler: (01:59:03)
Well, we need to achieve savings starting on July one. So it would be in the next… Before the budget is enacted, I mean, before the fiscal year starts.
Speaker 9: (01:59:15)
Before this July one, so a matter of weeks.
Keely Bosler: (01:59:20)
Speaker 9: (01:59:20)
Okay. I mean, they [crosstalk 01:59:21]-
Keely Bosler: (01:59:21)
I mean, there are provisions for the money to be provided after that and for the reductions to be changed in the control section that the governor referenced, but we would have to start implementing the reductions on July one.
Speaker 9: (01:59:39)
So at some point there’s a diminish in returns, right? Like if they don’t act until September, October, some of it you can’t do anything about because it is what it is, right?
Keely Bosler: (01:59:48)
Speaker 9: (01:59:48)
Okay. All right.
Speaker 6: (01:59:51)
If you can talk about this 5.3 billion for hospitals. How is that being divvied up among specific hospitals, and then how much is going to go to offset their lost revenues due to the stay at home orders?
Keely Bosler: (02:00:06)
I’m going to have to get back to you on that, because I do not have the information on the federal CARES Act allocation for hospitals. Yeah. I’m sorry, or maybe it looks like Mark has left, but Dr. Galley, but I just do not have that. I’m sorry.
Speaker 6: (02:00:22)
Can you talk about the decisions for dealing with loss revenues in the state parks, then why is it that the equity programs that are seeing the cuts there?
Keely Bosler: (02:00:33)
So the equity programs are one of the pullbacks, so those were expanded programs in January. It’s not that those are not really important programs. We’re just going to be, for the entire budget year, really dealing with the lost revenues because parks has a significant amount of general fund, but is also very much dependent on their fee revenues. And so we have budgeted a contingency of about 150 million to make sure that we can continue to maintain park operations and do all of the activities that they need to do to protect public health in the interim. So the January proposal is really more of a reflection of not being able to afford to do new things.
Sophia Bollag: (02:01:23)
Thanks, Keely. This is Sophia Bollag from the Sacramento Bee. So the budget proposal says that the lowest paid state workers will still get raises, and I’m wondering, what’s the salary threshold for those and are the scheduled raises for the rest of state workers canceled?
Keely Bosler: (02:01:38)
So in the SCIU contract that we worked on with SCIU 1000 last year, there were a couple provisions in it that were really important to our lowest paid workers in the state workforce. And one of them was accelerating the rate that some employees who were still to get to $15, and so we proposed to accelerate those minimum wage employees getting to $15 earlier than current law. And then the other item was providing a flat stipend amount for healthcare costs on every employee, and that obviously is a much greater importance from a percentage of payroll then to lower wage workers than it is for higher wage. So those are things that we want to maintain as we go back to the table with that bargaining unit that has the majority of the lower paid workers in state government, and we want to do our best to preserve those investments so we can continue to have that important equity frame in all of the different components of the issues that we’re working on.
Sophia Bollag: (02:02:54)
Got it. And just to clarify, so the 10% pay cuts you’re proposing, is that all state workers, including those in healthcare and public safety?
Keely Bosler: (02:03:03)
Speaker 10: (02:03:07)
[inaudible 02:03:07] Is there anything in the budget that speaks to whether or not the governor is going to maintain the January increase of the minimum wage? Is that covered somewhere in here?
Keely Bosler: (02:03:32)
No, thank you for asking. That is in the encouraging recovery chapter and while the conditions do exist, the budget does not reflect pausing the minimum wage, so it does not reflect pausing the minimum wage.
Speaker 10: (02:03:49)
So the increase would continue?
Keely Bosler: (02:03:50)
Yeah, so the increase would continue. Sorry.
Speaker 11: (02:03:57)
Hey, could you talk a little bit more about this housing section? It looks like this tax credit would be maintained, but there’s discussion of clawing back some 500 and something million dollars from some programs and some sort of a reorganization of a comprehensive strategy, and then something about using the mortgage. So could you-
Keely Bosler: (02:04:27)
Let me talk about… Yeah. So obviously this has been a huge focus for the governor since day one of his administration. We continue in this difficult budget time to prioritize that the tax credits, the low income housing state tax credits, which are really important to getting more low income housing built in the state. We had proposed another 500 million in credits in the January budget, and we do propose to maintain that.
Keely Bosler: (02:04:57)
Also over the last year, we put really in an unprecedented infusion of general fund into some of these housing programs, and while some of it has already been allocated and used, some of it has not. And so we are proposing to pull back that general fund that was included, that was still available, to provide additional budgetary solutions. All difficult choices, but the three buckets are 250 million that was allocated for mixed income development over the next three years, 200 million for infill infrastructure grants, and then another 115 million for some other housing funds that were able to provide general fund solution. These are hard decisions, but given the magnitude of the impacts on all parts of the budget, we felt this was prudent.
Keely Bosler: (02:05:51)
The other thing is the national mortgage settlement. There was obviously an action on a lawsuit that stemmed back to actions many, many years ago regarding some settlement revenues in the budget. And so we are putting forward a revised proposal. Last year, we talked about 331 million going primarily to legal aid for renter assistance and the other renter legal aid services. We are now proposing to modify that proposal to provide 300 million for actual mortgage assistance and housing counseling, and then the remaining 31 million would go to augment legal aid resources. So it’s a modified proposal from what we were pursuing earlier, but I think also will provide important assistance, given the impacts to many households, many, many households across the state.
Keely Bosler: (02:06:49)
We are also committed to really changing. And the governor talked about this in his January proposal. We continue to work through making less byzantine the housing programs at the state level by looking to consolidate and synchronize programs at both HCD, Housing and Community Development, and also the Treasurer’s office, both the Debt Limit Allocation Committee and the Tax Credit Allocation Committee. And then also with CalHFA as well. So there’s just a lot of coordination. When a low income housing project is put together, it usually is drawing funds from many different sources. And there’s a lot that we, when we reviewed it, that we could do on our end to better streamline and coordinate those processes to not add to delay in getting those projects built. So that continues to be something that we work on. And we obviously have a new agency secretary over the business consumer services housing, and she has been digging in on that and working through that as well.
Speaker 12: (02:07:55)
We have time for one more question.
Speaker 13: (02:07:58)
Oh, sorry, this is a dumb question if I could ask one, but I just want to clarify it. I just want to make sure that the 4.8 million general fund ongoing for public health and the 5.9 million general fund for the upcoming fiscal year, that’s for the State Department of Public Health.
Keely Bosler: (02:08:14)
Yes, yeah, and the labs specifically. All right. Thanks everyone. I appreciate it. And you know where to find HD. Thank you.