California leaders have reached a tentative agreement on the state budget, which is set to take effect on July 1. This budget hinges on Governor Gavin Newsom’s insistence that lawmakers pass a housing reform proposal. The discussions have highlighted the ongoing challenges of updating California’s environmental regulations to accelerate housing construction, especially in a state where Democrats hold the majority.
Lawmakers have been hesitant to make significant changes to the California Environmental Quality Act (CEQA), despite pressure from the governor and criticism from reform advocates. These advocates argue that the current regulations hinder the state’s ability to build enough housing to meet demand.
The budget agreement reflects a compromise between Newsom and Democratic lawmakers, who are working to address a projected $12 billion budget deficit. Newsom’s spokesperson, Izzy Gardon, emphasized that the governor’s approval of the budget is contingent on passing legislation to streamline housing and infrastructure development.
The budget deal involves borrowing money, using state reserves, and reallocating funds to manage the deficit. While it spares many state programs from immediate cuts, it does not fully address California’s long-term financial challenges. Assembly Republican Leader James Gallagher criticized the agreement, claiming it only masks the state’s financial issues stemming from overspending.
The agreement includes cuts to the expansion of state-funded healthcare for undocumented immigrants and reinstates asset tests for Medi-Cal enrollees. However, the final deal will yield less savings than Newsom originally proposed. Lawmakers also pushed for an additional $500 million in funding for homelessness assistance, despite the governor’s earlier resistance to increasing funding for counties.
The budget preserves Newsom’s plan to allocate $750 million to expand the California Film and Television Tax Credit, which has support from Hollywood studios and workers’ unions. However, the agreement is expected to lead to more difficult financial discussions in the future, especially with the potential loss of federal funding.
A key component of the housing reform proposal, introduced by Senator Scott Wiener, aims to reduce the number of building projects requiring full environmental reviews and streamline the process for developing environmental impact reports. Newsom has made it clear that he will not sign the budget without these CEQA exemptions.
California is facing challenges ahead, as the state anticipates further budget deficits and potential federal funding cuts. Lawmakers are expected to finalize the budget and pass additional legislation by the deadline, with some details still to be determined.