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California Budget challenge

2024 California Budget Challenge

Following large surpluses in 2021-22 and 2022-23 due to higher than expected revenue and federal COVID relief funds, the state faced a projected deficit of $20.4 billion in 2024-25 following the May Revision. This is a result of lower-than-expected General Fund revenue and the expiration of the state and national COVID emergency orders. The Governor and Legislature agreed on a number of one-time and ongoing spending changes to maintain funding for long-standing state priorities—such as healthcare, housing, homelessness, and education—while still closing the deficit in 2024-25. The California Constitution requires the state to pass a balanced budget, so changes have to be made to close the gap.

 

In order to address the large deficit, the State will commit to a number of spending cuts and delays while also pulling from reserves. The 2024-25 fiscal year began on July 1st. 

 

While the budget seeks to address the budget shortfall by making a number of cuts from various programs, the legislature has pushed forward a number of bond initiatives that will appear on the November ballot. The following bonds will go to voters to lessen the burden of budget cuts on certain sectors:

  • $10 billion bond for school facilities (Prop 2): would pay for repairs and upgrades at K-12 schools and community colleges throughout the state.

  • $10 billion climate bond (Prop 4): would provide funding for safe drinking water, flood resilience, extreme heat, and more.

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Major Components of the Final 2024-25 Budget Agreement:

Reserves

  • Withdraws $6.3 billion of reserve funds to help close the budget gap resulting in $22.8 billion of total reserves remaining by the end of the fiscal year

Spending Reductions

  • The budget cuts spending by $16 billion, significant reductions include:

    • $500 million from student housing at UC, CSU, and Community Colleges

    • $1.1 billion from various affordable housing programs

    • $746 million from various healthcare workforce development programs

Spending Delays

  • The budget delays spending by a total of $5.2 billion, significant delays include:

    • $550 million for broadband infrastructure expansion

    • $524 million in funding for UC and CSU

    • Delays a planned expansion of the California Food Assistance Program which provides state-funded food assistance to legal permanent residents that are not eligible for CalFresh

Maintaining Support for Core Programs

  • The budget maintains funding for long-standing priorities, some of which include:

    • $115.3 billion in total funds for K-12 and community colleges

    • $1 billion to local governments for homelessness funding—tied to increased accountability measures

    • $7.1 billion in total funds for behavioral health treatment

    • $147 million in total funds to allow California to provide an estimated $1 billion in federal food assistance