Newsom’s 2023 budget proposal includes climate cuts, to tackle fiscal shortfalls

Gov. Gavin Newsom (D) on Tuesday unveiled a 2023 state budget proposal that includes significant cuts to climate investments — even as a relentless storm system battered California’s coast.

California is now facing an estimated budget gap of $22.5 billion for the 2023-2024 fiscal year, which the governor attributed to declines in both withholding and capital gains taxes.

And although the state has $35.6 billion in budgetary reserves, including $22.4 billion in its “budget stabilization account,” the shortfall has led to some major cuts across the board.

“We’re not touching the reserves because we have a wait and see approach to this budget,” Newsom said at a press conference where he released the new budget proposal.

“We are in a very volatile moment,” the governor added, noting that the budget will be revised in May when “there’s more clarity.”

Regardless of the shortfalls, Newsom emphasized that climate initiatives for the most part were unscathed in the new budget proposal.

“We’ll continue to do more than any other state in America and no significant impacts on this budget: wildfires, drought, yes, and floods — all the climate bucket,” the governor said.

Nonetheless, his budget proposal maintains just $48 billion — 89 percent of last year’s $54 billion allocation — in climate investments over the next five years.

And while the proposal includes a variety of new climate investments, several key initiatives would see significant cuts, if the state legislature finalizes the budget proposal. 

Chief among the new investments added to the proposal is $201.1 million toward protecting California from the impacts of floods.

“What’s top of mind is flood investments,” Newsom said.

“I’ll be off after this, down to the Central Coast,” the governor added, recalling the “conveyor belt of storms” that have been pummeling the region.

A $135.5 million general fund over two years would help support urban flood risk reduction, while a $40.6 million general fund would go toward reducing the risk of levee failures and flooding.

Another $25 million would specifically back projects that reduce the risk of flooding in California’s Central Valley, according to the budget summary.

In addition to flood-related funds, other new climate investments outlined in the proposal are a $125 million drought contingency fund as well as $31.5 million for modernizing water rights.

Also included are investments in urban water use, groundwater recharge in the San Joaquin River Basin and planning and permitting for waste discharge and safe drinking water projects.

Because of the gaping shortfall, however, several climate initiatives would face reductions.

The proposal would reduce $24 million in 2023-2024 funding for water resilience programs and delay an additional $270 million to 2024-2025 — while maintaining 95 percent, or $470 million, in funding for such initiatives.

Cleanup efforts of toxic forever chemicals would also face some setbacks: a reduction of $70 million and a delay of $30 million to 2024-2025 — maintaining 65 percent, or $130 million, of such cleanup resources.

Water recycling, water efficiency programs, floating solar panel studies and water refilling initiatives at schools also took a hit in the budget proposal.

The first three categories would be reduced to 95 percent, 75 percent and 57 percent of their previous levels, respectively, while the last one would be eliminated entirely.

The budget would maintain 89 percent, or $8.9 billion, of zero-emission vehicle investments, with a focus on increasing access to clean transportation for disadvantaged and low-income communities.

While the 2022 budget included $13.8 billion for broader transportation programs and projects, the 2023 proposal would bring $2.7 billion in reductions, partially mitigated by $500 million from state transportation funds.

These shifts would enable the state to maintain 84 percent of transportation investments, according to the proposal.

Meanwhile, California continues to benefit from the $38 billion it received in formula funding for highway and transit from the federal bipartisan infrastructure law, the proposal stated.

As far as energy projects are concerned, the budget maintains 89 percent, or $7 billion, of last year’s $7.9 billion investment.

With regards to wildfire and forest resilience, the new budget proposal maintains 97 percent, or $2.7 billion of last year’s $2.8 billion commitment. 

The budget also includes funds to support climate legislation passed in 2022, including an act that established a setback distance between residences and new oil wells, as well as bills to develop carbon removal targets and to advance a clean electricity grid. 

Funds to facilitate the removal of dams, improve river health and address fish declines in the Klamath Basin are also detailed in the budget proposal.

Newsom justified the reductions to climate investments within the budget by reminding reporters that California has now received $48 billion through federal legislation signed into law by President Biden.

These federal funds, he explained, are “not only filling that bucket back up, but substantially increasing the total investment.”

When putting together the climate and transportation budgets for the past couple years, Newsom stressed that he and his colleagues were uncertain whether such federal funds would materialize.

“Few of us were confident that Congress — Machin, Sinema, Manchin, Sinema, Sinema Manchin, remember those days? — would actually put together two extraordinary historic packages,” the governor added.

Newsom was referring to a bipartisan infrastructure bill and the Inflation Reduction Act — the Biden administration’s climate spending package that was passed on party-line votes in the House and the Senate. Sens. Joe Manchin (D-W.Va.) and Kyrsten Sinema (I-Ariz.) were involved in negotiations on both bills and were influential in cutting down the size of the Inflation Reduction Act.

In addition to its shifts in climate investments, Newsom’s budget proposal makes a variety of changes in other key sectors.

The proposal includes funds to implement a new grade below kindergarten to serve 450,000 children per year, according to a fact sheet accompanying the budget.

Also within the proposal are investments in free meals for every student, as well as in child care, affordable higher education and moving toward debt-free college.

Funds to increase California’s housing supply and tackle homelessness, as well as increase health care access, are also detailed in the proposed budget. 

“We are protecting the most vulnerable Californians, despite the situational challenge, and continuing unprecedented, medium- and long-term investments into the next generation,” the governor added.