Green and Equitable Recovery at the Core of California's $262.6 Billion Budget

On Monday 28th June, the California State Legislature approved a record $262.6 billion state budget bill, following a $70 billion budget surplus including better-than-expected tax revenues and a $27 billion pandemic relief federal aid package. The approval came just in time for the start of the 2021-2022 fiscal year, on 1st of July.

The legislature had been negotiating intensively since May, when Governor Newsom presented the May Revision of his government’s budget proposal. Referring to his proposal as the “California Comeback Plan,” the governor boasted the state’s potential for an impressive green economic recovery, laying out an $11.8 billion framework of investments mitigating the state’s imminent climate risks.

Following the budget approval, Governor Newson stated, “California’s economy is coming roaring back. With the largest surplus in California history, we’re using this once-in-a-generation opportunity to create an economic recovery that will leave nobody behind – with money going directly back to Californians, the nation’s largest small business relief programs, and unprecedented investments to address California’s most persistent challenges such as homelessness, climate change and equity in our education system.”

Facing pressure from the legislature, which argued that the elevated state revenues relied on several one-off windfalls, Governor Newsom’s government had to compromise on spending the surplus largely on one-off expenditures, such as pandemic relief payments to taxpayers and short-term programs to ensure education affordability and a safe return to in-person teaching. Perhaps aided by another ongoing heat wave throughout much of inland California and an unsettling wildfire count that already exceeded last year’s record number through June, the approved budget also allocates $1 billion over several years for wildfire prevention, $3 billion to alleviate drought, and $3.7 billion over the next 3 years to a Climate Resiliency Package, which is triple the amount the Governor asked for in his May Revision.

Other green investments under the budget include:

• $400 million for green hydrogen, long duration storage, energy efficiency in industry and food processing,
• $125 million for manufacturing grants relating to zero-emission vehicles,
• $500 million for the Clean Transportation Program to fund charging and hydrogen refueling infrastructure,
• $160 million for medium and heavy duty ZEV infrastructure,
• $75 million to provide incentives for housing electrification and local energy storage under the BUILD program,
• $13 million in offshore wind planning.

Also notable is $1.75 billion allocated to alleviate the backlog in affordable housing construction, which will likely include extensive energy-efficient housing expenditures in light of the rapidly evolving Building Energy Standards Code, of which an update will be released for 2022. A remarkable omission from the budget is any funding for the high-speed rail project through California’s Central Valley, for which the Governor requested $4.2 billion in his May Revision.

Over the course of the next months, the Climate Resiliency Package and other larger sums will be broken down into funding plans for specific state programs and projects, which will be laid out in trailer bills that will also require approval from the legislature.