California Legislative Update - July 2021

The Legislature recesses for Summer on July 16 and will return one month later to wrap up its work for the legislative session, which ends September 11. Much of the focus over the last couple months has been the budget and how the State’s $75 billion windfall would be spent.

Both houses of the Legislature passed budget bill AB 128 (Ting) for the 2021-2022 fiscal year. The budget package authorizes General Fund expenditures of $195.5 billion and assumes $201.9 billion in total General Fund resources. It includes approximately $25.5 billion of combined total reserves in the Budget Stabilization Account (BSA), the Special Fund for Economic Uncertainties (SFEU), the Public School System Stabilization Account (PSSSA) and the Safety Net Reserve.

A few of the notable components from this year’s budget include:

• $1 billion per year, ongoing, for flexible aid to local governments to combat homelessness.
• $1.2 billion in federal funds in 2021-22 (and $1 billion in 2022-23) to continue Project HomeKey.
• $1.75 billion to alleviate the backlog in affordable housing construction.
• $130 million for the development, maintenance, and preservation of farmworker housing.
• $60 million General Fund one-time to the Department of Water Resources for grants to support local planning and implementation of the Groundwater Sustainability Plans.
• $40 million General Fund one-time to the California Department of Food and Agriculture to award, administer, and monitor State Water Efficiency and Enhancement Program (SWEEP) grants.
• $3.35 million for technical assistance for underserved farmers.

Contingent upon future legislation, the budget appropriates the following for several Legislative packages:

• $3.475 billion (General Fund, Coronavirus Fiscal Recovery Fund of 2021, bond and special funds) for water and drought resilience.
• $2.7 billion (General Fund, GGRF, and special fund) in 2021-22 ($3.9 billion over three years) for zero-emission vehicles and related infrastructure.
• $1.225 billion General Fund for a climate resilience package with the intent to appropriate $1.225 million annually in 2022-23 and 2023-24.
• $1 billion General Fund for a wildfire prevention and resilience.
• $776 million (General Fund and special funds) for agriculture.
• $1 billion (Coronavirus Fiscal Recovery Fund of 2021) in 2021-22, and $7 billion (CFRF and General Fund) over seven years for Broadband investments
• $835 million (General Fund) for additional investments to help the state reach its clean energy goals.

Governor Newsom signed AB 128 into law on June 28th. On that same day, the Legislature passed SB 129, a Budget Bill Junior that builds on the priorities of AB 128.

All told this bill, combined with AB 128, reflects a total spending plan of $262.6 billion, of which $196.4 billion is from the General Fund, and total General Fund reserves equaling a record $25.2 billion. Total Proposition 98 spending is a record, $93.7 billion, including $66.4 billion from the General Fund.

Upon return from Summer recess, the Legislature will amend and adopt multiple Budget Trailer Bills to implement the spending contained in the budget bills and wrap up the nearly 1,000 bills that continue to move through the legislative process.

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Source: Kahn, Soares and Conway, LLP

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