California State Budget Update

Manatt, Phelps & Phillips, LLP

Governor Gavin Newsom, Assembly Speaker Anthony Rendon and Senate President Toni Atkins have reached agreement on a more than $300 billion “budget framework” for the state’s 2022–23 budget. The full Legislature must approve the budget before July 1, with a vote expected on Wednesday, June 29. While most spending decisions have been finalized, details of an estimated $20 billion plan to address energy and climate change have not yet been hammered out, and language to implement the budget is still being negotiated.

The more than $300 billion spending plan is the largest in state history. However, Governor Newsom, Speaker Rendon and President Atkins emphasize that it is a responsible budget, building record reserves and taking into account recent economic indicators of a possible recession, reduced state revenues and an increased need for state services.

Highlights of the Budget Framework Include:

  • $17 billion Inflation Relief Package
    • $200 to $350 per person for most state taxpayers, together with payments to the many seniors and disabled Californians who don’t file tax returns
    • Suspension of 23-cent sales tax per gallon of diesel gasoline for one year beginning October 1
    • $2.3 billion in other business and non-profit financial relief
  • $47 billion in infrastructure spending
  • $37.8 billion put into state reserve accounts, a record amount
  • $2.6 billion to provide universal access to health care coverage
    • All low-income undocumented residents will be eligible for state-subsidized insurance regardless of age
    • An Office of Health Care Affordability with new, sweeping rate review authority over California health plans and health insurance, and review of health industry mergers and acquisitions

What’s Next?

  • Wednesday night, June 29: Vote on amended budget in Senate and Assembly
    • Senate Bill 178—referred to as “Budget Bill Jr.”—will amend the recently passed legislative budget plan sent to Governor Newsom two weeks ago
  • Coming months:
    • Negotiation of a lengthy list of substantive “trailer bills” to make statutory changes needed to implement the budget agreement
    • Action on trailer bills will continue throughout the remainder of the legislative session, which is slated to adjourn on August 31
    • Spending for energy resilience and the state’s climate change response to be determined between now and August 31

We will be providing further detail on significant state spending in the coming days and months as the final budget bill and implementing language are enacted.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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