The Crush July 2022 - 4

State Budget Update
Article by Michael Miiller
On June 30, Governor Newsom signed a $308
billion budget that included a historic $97 billion
surplus. Final details are unclear on many budget
issues, as budget trailer bills in August will fill in the
blanks. Those additional budget measures will likely
include large expenditures for drought and water
resilience, energy, and climate. Click HERE for a link
to an analysis prepared for CAWG by The Gualco
Relative to agriculture, the budget commits $75
million from the California Emergency Relief Grant
Fund for the California Small Agricultural Business
Drought Relief Grant Program. Funds would be
available until June 30, 2024. The California Water
Plan would also receive $26 million with another $60
million going to the Agricultural Drought Response
Program and the Delta Response Pilot Program.
Newsom highlighted the following actions achieved
in the budget:
* $170 billion to " continue our transformation of
education in California. "
* $53.9 billion in new climate change investments.
* $17 billion in an " Inflation Relief Package. "
* $12 billion for homelessness programs.
* $4.3 billion to help " keep the lights on this
summer. "
* $3.4 billion to respond to the Mental Health
* $1.8 billion to " continue implementing the
SMARTER plan [COVID-19]. "
The list above is just the highlights. When adding
up all the numbers in the budget proclamations by
the Governor and the Legislature, we easily surpass
the $308 billion total. So, one may ask, " How is that
possible? "
When looking at the details of each funding item, we
find the funding often includes real money this year
Page 4 | July 2022
with a promise for additional funding in future years.
For example: The state Unemployment Insurance
(UI) Fund took a huge hit in 2020 due to the record
unemployment and fraudulent UI claims. This created
a $24 billion deficit in the UI Fund. That deficit will
ultimately have to be paid by employers through
increases in their FUTA payments for the next 8 to 10
That is why the California Chamber of Commerce
led a business coalition, which included CAWG, in
pushing for using part of the $97 billion surplus to
pay down the UI Fund deficit. Newsom proposed
providing a $1 billion payment this year with a
promise of another $2 billion in next year's budget.
Legislative Republicans and moderate Democrats
pushed for as much as $7 billion.
Ultimately, only $250 million is provided in this year's
budget and another $750 million is committed in
next year's budget. Additionally, the legislature is also
proposing $500 million to pay for the first two years'
worth of the federal tax increases per employee up
to the first 250 employees. So far, this is also only an
intent to pay.
The current budget surplus is because California's
revenues soared in 2021 on the back of a roaring
stock market. The top 1% of California earners
account for roughly half of all the state's income tax
collections. That revenue may be waning as the stock
market has taken a dip, inflation is rising, interest
rates are increasing, and a recession may be on the
horizon. This raises budget math questions about the
ability of future budgets to honor the commitments
made in this year's budget.
On July 1, when the 2022-23 state budget took
effect, California's gas tax increased by 3 cents per
gallon. Republican and Moderate Democrats in the
legislature pushed for a suspension of both the gas
tax and the diesel fuel tax. However, Newsom took
a different approach and announced in May that he
wanted a gas tax rebate for all vehicle owners and
Continued on page 5

The Crush July 2022

Table of Contents for the Digital Edition of The Crush July 2022

The Crush July 2022 - 1
The Crush July 2022 - 2
The Crush July 2022 - 3
The Crush July 2022 - 4
The Crush July 2022 - 5
The Crush July 2022 - 6
The Crush July 2022 - 7
The Crush July 2022 - 8
The Crush July 2022 - 9
The Crush July 2022 - 10
The Crush July 2022 - 11