Contact Us Member Login

May Revise- Budget Update

Governor Gavin Newsom presented the May Revision of his January budget proposal on May 13, and for the first time, the governor’s budget has surpassed $300 billion. The purpose of the Revision is to update revenues based on tax receipts and present any new administrative proposals or changes to the governor’s January proposal. The summaries below primarily reflect changes or additions to the governor’s proposed budget. Unless withdrawn, all the governor’s proposals from January remain on the table.  There were no significant changes to transportation funding proposals, other than increasing funding for Active Transportation Program funding from $500 million to $1 billion.

Revenues, Reserves, & Relief

Revenues: The governor’s May Revision pegs the budget surplus at $97.5 billion. After accounting for transfers, which includes loan repayments as well as deposits into the Rainy-Day Fund, baseline General Fund revenues at the May Revision exceed the Governor’s Budget forecast by $54.6 billion over the budget window.  The surplus includes revenue increases over three years — $442 million in 2020-21, $30.3 billion in 2021-22, and $23.9 billion in 2022-23. $37.1 billion is proposed for budgetary reserves and of the $49.2 billion discretionary surplus, 94% is proposed for one-time projects.

A topic of much conversation over the last several months has been the Gann or State Appropriations Limit. In January, the administration estimated that the Gann limit was likely to be exceeded in both 2020-21 and 2021-22 by a total of $2.6 billion. The May Revision projects the state will be under the limit for 2021-22 and will exceed it by a small amount in 2022-23.  The LAO points out that the Governor leaves $3.4 billion in unaddressed SAL requirements in 2022-23.  The legislature can address this unaddressed SAL requirement by appropriating funds for capital expenditures that are outside the SAL calculation.

It is safe to anticipate that an exploration of long-term solutions to address the Gann limit will continue in the coming months. These solutions would require either reducing taxes to slow revenue growth or requesting that voters change the limit in some way.

Reserves

  • Prop 2 Budget Stabilization Account (Rainy Day Fund): $23.3 billion – The Rainy-Day Fund is now at its constitutional maximum requiring $476 million to be dedicated to infrastructure investments in 2022-23.
  • Public School System Stabilization Account: $9.5 billion
  • Safety Net Reserve: $900 million
  • Operating Reserve: $3.4 billion

Relief: The administration is proposing $18.1 billion in direct relief to Californians including:

  • $11.5 billion to provide $400 to vehicle owners, capped at two vehicles per household, with no income eligibility threshold, but excluding fleets and corporate-owned vehicles and vehicles over a certain value.
  • $750 million in incentive grants to transit and rail agencies to provide free transit for Californians for three months. This proposal will provide an amount to agencies based on their 2019 fare revenues.
  • $327 million in 2022-23 and $112 million in 2023-24 to exempt the General Fund (3.9375%) portion of sales tax on diesel fuel from October 1, 2022, to September 30, 2023.
  • $2.7 billion General Fund in 2021-22 for rental assistance through state and local programs.

Transportation Funding Proposals

The Budget proposes investing $9.6 billion in transportation programs.   This includes $5.4 billion General Fund and $4.2 billion Proposition 1A High-Speed Rail bond funds. The funding is allocated as follows: 

  • $4.2 billion in bond funds for High-Speed Rail
  • $2 billion for transit and rail infrastructure projects that will be allocated through the Transit and Intercity Rail Capital Program (TIRCP)
  • $1.25 billion for Southern California transit and rail projects.  This year the funds are not limited to projects needed to host the Olympics. 
  • $1.25 billion for Active Transportation Projects, divided as follows:
    • $1 billion for Active Transportation Program projects.  These funds will likely be used to fund the bicycle and pedestrian projects that were not funded in the last round.  , which encourages increased use of active modes of transportation such as walking and biking, and increases the safety and mobility of non-motorized users.
    • $150 million to establish the Reconnecting Communities: Highways to Boulevards Pilot Program, which is intended for projects that remove transportation barriers by investing in the conversion of underutilized highways into multi-modal corridors.  
    • $100 million for bicycle and pedestrian safety projects, allocated through the Highway Safety Improvement Program.
  • $500 million for High Priority Grade Separation Projects. 
  • $400 million for state and local Climate Adaptation Projects that support climate resiliency and reduce risks from climate impacts. 
ProgramGovernor’s January BudgetGovernor’s May Revise Proposal
High Speed Rail$4.2 billion (bond funds)$4.2 billion (bond funds)
Priority Transit Projects$2 billion$2 billion
Southern California Projects$1.25 billion$1.25 billion
Active Transportation Projects$750 million$1.25 billion
Grade Separation Projects$500 million$500 million
Climate Adaptation Projects$400 million $400 million
 $9.1  billion$9.6 billion

Senate’s Transportation Spending Proposal

The Senate proposes to appropriate an additional $15 billion in general fund revenue for transportation programs for a total allocation of $20 billion that would be appropriated over 4 years.  The 3rd and 4th year would be subject to future budget action if the entire $20 billion is not secured this year.

Program Budget
Priority Transit Projects$11.8 billionIncludes funding targets for each region.
Freight & Workforce Investment$2.1 billionMatches the Governor’s proposal of $1.2 for port infrastructure, $110 million for job training, and $790 million for Trade Corridor Enhancements
Active Transportation Projects$2 billionIncludes Highways to Boulevards and the safety funding proposed by the Governor