County of Marin Summary of Governor’s May Revise 2024-25 Budget

The Governor released his May Revision of the 2024-25 State Budget Proposal. The budget problem for next year is $45 billion, or $7 billion worse than in the January budget. 

• After major winter storms, IRS extended 2022 tax filing and payment deadline from to Nov. 2023.
• Therefore, the 2023 Budget Act (passed last June) included significant revenue uncertainty. When 2022 revenues finally came in – they were much weaker than expected.
• The January Budget identified a $37.9B shortfall. That has now increased to $45B.

Table from 2024-25 May Revision: difference from 2022 Budget Act revenue projections:

California remains heavily reliant on high-income earners, with the state’s top 1% paying half of state personal income tax revenues. This means the state’s fiscal health is largely tied to market performance; higher inflation, interest rates, and a depressed stock market in 2022 largely the cause of lower revenues.

The “Big Three” taxes are $10.5 billion below January Budget predictions:

• Personal income tax:            $2.4 billion lower 
• Corporate tax:                       $5.8 billion lower
• Sales & use tax:                    $2.3 billion lower

The Governor largely addresses the shortfall through spending reductions and delays and proposes to only withdraw $4.0B in reserves in the coming year. The May Revise incorporates the Early Action Budget package – but CSAC notes its $17.3B in solutions did not include many difficult decisions (use of reserves totaled $12.2B over the multi-year budget period).

What comes next in the state budget process:

Use of reserves, fiscal policy changes

• Governor has not declared a budget emergency for 2024-25. Doing so would open larger withdrawals from the Budget Stabilization Account (“Rainy-Day Fund”). 
  • May Revise proposes taking only $3B from the fund, compared to $12.2B in January.
• Maintains proposal to withdraw entire $900M balance of Safety Net reserve.
• $8B overpaid to schools the last 2 years (Prop 98 minimums), will be accrued to future year budgets: meaning $1.6B/year of the General Fund for next 5 years will not be available for non-school priorities.

In their communications, the Administration has noted they focused proposed reductions on one-time program enhancements added in recent years, and entitlement expansions planned but not yet implemented.

General Government 

• Trailer bill language was released re: making charter schools eligible for ERAF dollars. The proposal would reduce Marin’s excess ERAF by $1.1M ongoing, without increasing school funding. 

Health and Human Services, client impacts

• Future of Public Health $200M ongoing funding eliminated, impact to Marin = $1.2M/year.
• Homeless programs originally proposed to be delayed are now eliminated: $260M HHAP Round 5, $80M Bringing Families Home for child-welfare involved, $65M for Home Safe program for victims of elder abuse, and $50M for Housing and Disability Advocacy. Marin impact = $2M reduction.
• Childcare slot expansion to create 200,000 new slots statewide is now paused at 119,000 new slots.
• CalWORKs reductions include Employment Services, elimination of Family Stabilization ($300K reduction to Marin), Home Visiting Program, and Behavioral Health Services.
• Behavioral Health Continuum Infrastructure Program (BHCIP) was nearly eliminated with a GF $450.7M cut, and BH Bridge housing also reduced by $450.7M. Governor has paired these reductions with announcing $90M for BHBH from Prop 1 next year, and plans to expedite the first round of Prop 1 bond funding. One-time $85M is added for Counties to support BHSA implementation.
• Children and Youth Behavioral Health Initiative significantly reduced by $420M over two years. Program provides $295K in grants to fund Licensed Crisis Specialists in Marin schools.
• Child welfare programs eliminated include Foster Care Caregiver Approvals program to meet timeline requirements for approving caregivers ($280K impact to Marin) and applying a “trigger” provision to planned rate increases for families. The Family Urgent Response System remains cut.
• CARE Act funding to counties is reduced to counties to reflect lower utilization of CARE Court. No funding to counties is provided for SB 43 implementation, but some funding is set aside for DHCS.
• Medi-Cal administration funding amounts to Counties has been frozen. CalAIM funding is maintained.
• IHSS Expansion Coverage for undocumented individuals eliminated. 

Housing, Infrastructure, Other

• $1.2B in cuts to affordable housing are maintained from the January Budget – but further reductions proposed include $35M for the Infill Infrastructure Grant Program, $75M to the Multifamily Housing Program, $26.3M for Veterans Housing and Homelessness Prevention, and full elimination of the Foreclosure Intervention Housing Preservation Program. $300M cut to REAP Grants 2.0 maintained.
  • Governor noted Proposition 1’s $2B bondsfor PSH (half for veterans) and $1B of BHSA funding redirected for housing.
• Low Income Housing Tax Credits reinstated for an additional $500M, as has been done since 2019.
• Active Transportation Program is cut by another $300M, after $200M cut proposed in January.
• Broadband: Reduces Middle Mile Initiative $1.5B over two years (Marin is still funded). Delays $200M for Last-Mile Grant (impact to Marin unknown). Increases funding for Broadband Mapping and Broadband Equity, Access, and Deployment program (BEAD).
• Climate Change largely “spared” with January’s $2.9B in reductions and $1.9B in deferrals standing – no further cuts, but further fund shifts are proposed to maintain Fire Prevention programs. Equitable Building Decarbonization reduced $140M, provides energy retrofits for low-income households.
• Public Defender Pilot Program Grant 3^rd year funding remains cut (impact to Marin = $270K)
• Arts funding reduced $22.5M for CA Arts Council and Performing Arts Equitable Payroll.
• Library cuts include elimination of Lunch at the Library Program, recently started at Marin libraries.

Not addressed in May Revise – but likely in next few weeks/months

• SB 525 (min wage for healthcare workers): Possible trigger to make subject to revenue availability.
• Wildfire insurance: Governor promised a Trailer Bill to address the state’s insurance crisis, likely acceleration of rate increase reviews and approvals by the Department of Insurance.
• November bond negotiations ongoing for Education, Climate and/or Housing. After Prop 1’s narrow passage, Governor has been outspoken he does not know if there is “voter appetite” for more bonds.