California leaders have reached a tentative agreement on the state budget, which is set to take effect on July 1. This deal comes after intense negotiations, largely driven by Governor Gavin Newsom’s insistence that lawmakers pass a housing reform proposal. The budget, totaling $321.1 billion, reflects ongoing challenges in addressing California’s housing crisis and a projected $12 billion budget deficit.
The discussions highlight the difficulty of reforming the California Environmental Quality Act (CEQA), which many believe has hindered housing construction in the state. Despite pressure from the governor and criticism from national advocates, the Legislature has been hesitant to make significant changes to this longstanding law. The proposed housing reform aims to streamline the building process by reducing the number of projects that require a full environmental review.
Newsom’s office expressed appreciation for the collaboration with the Legislature, emphasizing that the governor’s approval of the budget hinges on the passage of the housing reform legislation. This proposal is seen as a crucial step in addressing California’s housing shortage, which has been exacerbated by high demand and rising prices.
The budget agreement comes amidst concerns about California’s financial future, with potential federal funding cuts looming. Lawmakers have opted to borrow money and shift funds around to balance the budget, avoiding immediate cuts to state programs. This approach has drawn criticism from some, including Assembly Republican Leader James Gallagher, who argues that the state is not addressing its long-term financial issues.
The budget also includes cuts to the expansion of state-sponsored healthcare for undocumented immigrants and reinstates asset limit tests for Medi-Cal enrollees. While some of Newsom’s proposed cuts were softened, the agreement still aims to reduce spending in areas where it is deemed necessary.
Democrats in the Legislature successfully pushed for additional funding for homeless housing initiatives, despite the governor’s initial resistance. The budget also preserves funding for the California Film and Television Tax Credit, a move welcomed by the entertainment industry.
As the budget process continues, lawmakers are expected to pass the main budget bill soon, with additional legislation related to housing reforms and other issues to follow. The state is bracing for future financial challenges, with estimates predicting annual deficits could reach between $17 billion and $24 billion in the coming years.