With deficit growing by $9.3 billion, Gov. Newsom pitches plan to float a climate bond to continue funding key projects.
By Brooke Staggs, THE ORANGE COUNTY REGISTER
For climate advocates, the growing state deficit unveiled in the revised 2023-24 state budget offers some bad news, some good news and a great deal of uncertainty.
The bad news in the budget presented Friday morning by Gov. Gavin Newsom is that, despite lobbying efforts and environmentalists pitching at least two alternative proposals, the $6 billion in cuts to climate spending that Newsom proposed in January are still included. If those multiyear cuts stand, it will mean significant hits to funding that previously was pledged to help speed California’s transition to nonpolluting cars, clean up the water supply, decarbonize buildings and protect residents against the increasingly dire effects of extreme heat.
The good news is that despite California’s projected budget shortfall jumping from January’s estimate of $22.5 billion to the new estimate of $31.8 billion, the state isn’t planning additional cuts for climate projects. That leaves intact a five-year plan to spend $48 billion on climate.
“We were really expecting there to be another round of massive cuts to the climate budget,” said Jamie Pew, climate fellow with the progressive group NextGen Policy. So, Pew said, the organization is happy with the plan released Friday.
“A budget is a statement of value. This shows that the administration is holding the line on climate spending even in the face of these severe economic headwinds.”
But even that good news is shrouded in a bit of uncertainty. Newsom is proposing to cover the additional deficit, in part, by working with lawmakers to pass a “climate resiliency bond” that could be used in place of state general fund money to pay for some planned projects.
Few details, including the total amount of that proposed bond, were available Friday. Natural Resources Secretary Wade Crawfoot said during a follow-up press conference that state leaders will partner with the Legislature to “develop a compelling proposal” for voters that will include “a high level of accountability.” And he said he’s optimistic voters will respond favorably.
“Californians have a really strong track record in supporting such investments, particularly given the accelerating climate impacts,” Crawfoot said.
But if the bond doesn’t pass, that means another $1.1 billion in funding for water recycling, urban greening programs, Salton Sea restoration and other environmental programs still could be on the chopping block.
That possibility raises concerns for Power in Nature, a coalition of more than 100 community, environmental and tribal groups in California. While the coalition said in a statement that members are glad to see a bond under consideration, they’re worried about pinning “important parks, urban greening and restoration programs” on a bond that wouldn’t come up for a vote until at least 2024 and kick in until 2025.
“There are a lot of questions that remain around the bond,” agreed Ryan Schleeter, spokesman for The Climate Center. And while his organization plans to be involved in those discussions, Schleeter said a one-time bond “is far from a silver bullet” when it comes to stable funding for climate projects.
Ironically, Newsom said some of the uncertainty both the California and federal governments are now facing around their finances is related to climate change-induced “extreme weather events.” Tax filing deadlines were pushed to October for most Californians, after a series of unusual storms pounded the state this winter and early spring. That means governments are operating based on revenue projections, rather than hard numbers.
The storms also prompted Newsom in this revised budget to allocate $290 million to pay for flood prevention programs needed as record snowpack melts in the summer.
Nearly half of that funding came from money previously set aside for drought prevention, while California Finance Director Joe Stephenshaw said they were able to move funds around to come up with the rest.
Such effects illustrate why California has to maintain as much funding as possible for climate projects, Newsom said.
But the governor’s team also covered another slice of the general fund deficit by shifting $635 million in planned spending to help low-income communities access cleaner transportation over to the state’s Greenhouse Gas Reduction Fund. Polluters pay into that fund, which supports a wide range of state programs aimed at reducing emissions.
While Chris Chavez with Coalition for Clean Air said they were glad to see that clean transportation funds weren’t simply cut outright, he said it’s important to remember that the shift still means an overall reduction in money available for climate programs, since that money will now be taken out of the GGRF pool. And considering the state recently passed a rule requiring commercial trucking to become emission-free in coming years, Chavez said the state needs more funding for incentives and support, not less.
While speaking broadly about a climate bond on Friday, Newsom also teased a planned announcement, next week, to revise state rules on permitting in a way that will let projects related to clean energy, transportation and water storage, among other things, move forward more quickly and with less paperwork. Asked if he was suggesting changes to the landmark California Environmental Quality Act, Newsom declined to go into detail until next week and said only that it’s past time for more comprehensive permitting reforms.
“We’re never going to advance our transition to clean energy in time to address our climate goals unless we are able to build these damn projects,” he said.
The governor did not consider two alternative budget proposals pitched in recent days that advocates say could have helped the state avoid such drastic cuts to climate funding.
Nearly three dozen environmental, health and consumer organizations sent Newsom a letter Tuesday asking him to close the budget gap, in part, by eliminating subsidies and tax benefits for the oil and gas industry rather than cutting funds for climate projects.
“Subsidizing polluters is antithetical to California’s climate goals, and particularly egregious when the Administration is proposing a $6 billion cut to the $54 billion earmarked in 2022 to protect communities from climate change and grow the clean energy economy,” said Arnold Sowell Jr., executive director of NextGen California, in a prepared statement.
Noting that Big Oil earned record profits last year, the groups identified nearly $8.7 billion in tax credits that benefit California oil companies, including write-offs for research and development and drilling. Cutting subsidies to these companies, they argued, could support ongoing funding for climate investments, so that such projects could advance even during years when there isn’t a budget surplus.
“Each tax break and subsidy we give fossil fuels is a dollar taken away from growing the green alternatives we need so badly,” said Liza Tucker, consumer advocate with Consumer Watchdog.
Last week, Democrats in the state Senate also proposed using corporate tax hikes but in this case on big companies of all sorts, not just oil and gas companies as a way to stave off budget cuts to key programs. They specifically called for restoring $2.1 billion that previously had been pledged for clean energy projects, including funding for electric vehicle incentives and charging programs, efforts to reduce emissions from public transit and school buses, residential solar and storage projects and more.
Senate Democrats pitched the budget proposal, which they called Protect our Progress, as simply reversing some of the tax cuts the top 0.2% of corporations received under former President Donald Trump’s 2017 tax plan.
But Newsom said he doesn’t think it’s the right time to consider a tax hike, with the state still issuing rebates to taxpayers as a result of previous record surplus years.
Newsom also said it’s not a good time to dip into the $100 billion in rainy day reserve funds that California has now accumulated to avoid these cuts.
Stephenshaw said the state anticipates annual budget shortfalls of $5 billion to $14 billion over the next several years, so leaving reserve funds in place could prevent future cuts to services.
Newsom and his team plans to spend the next month negotiating with the state Legislature over the proposed budget.
The Legislature has until June 15 to pass the new budget, which will take effect July 1.