Governor’s Budget Highlights

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California Governor Jerry Brown released his proposed budget for the state earlier this month. While the state’s fiscal fortunes have improved [PDF], the governor’s spending proposals strike a measured tone, with a focus on building up the state’s reserves and making deferred payments to schools that were hard-hit during the recession. The budget underscores the governor’s support for two major infrastructure projects – implementation of the Statewide Water Action Plan (including a fix for the Bay Delta) and financing for high speed rail. It also includes funding for green projects and throws support behind an economic development tool that may fill the void left by redevelopment’s demise.

On the sustainability front, Jon Christensen and Mark Gold, from the UCLA Institute of the Environment and Sustainability, celebrated the level of support for green projects in this year’s budget. The governor proposed using $850 million of cap and trade revenues for a full suite of the sustainability-related programs including $100 million of support for Sustainable Communities Strategies (SCS). SCS investments can support a variety of projects, including expanding transit, promoting transit-oriented development with affordable housing, supporting active transportation projects, and preserving agricultural land. Additionally, $80 million in funding is proposed to perform energy efficiency upgrades in low-income communities.

The governor also proposes spending some cap and trade money for high speed rail. His budget includes $300 million in new funding for rail modernization, including $50 million for Caltrans and $250 million from cap and trade revenue for the California High Speed Rail Authority. This funding will provide revenue to continue infrastructure work that began in 2012, which was funded with $7.8 billion in state and federal funds.

In addition to financing for rail infrastructure, the governor’s budget included significant funding to complete the Statewide Water Action Plan. If this budget is passed, funding could be made available for implementation of projects and programs that improve water management in the state and provide greater water security for all Californians. This includes investments to manage and monitor groundwater, “with a focus on disadvantaged communities in the south San Joaquin Valley and potentially south Los Angeles County as well.” There is also proposed funding for implementation of regional water management plan projects and financing for flood prevention infrastructure.

Finally, the proposed budget throws a bone to local governments looking for an economic development tool to replace redevelopment. The governor proposes expanding the tax increment financing tool utilized by Infrastructure Finance Districts (IFDs) to apply to a broader array of uses than current rules allow. While IFDs were generally restricted to funding regional scale public works projects, the governor’s budget proposes expanding the types of projects that can be financed by establishing an IFD. The expanded project list includes military base reuse, urban infill, transit priority projects, and affordable housing. The budget stresses that the expansion of IFDs should not come at the expense of the ongoing redevelopment dissolution process. Cities or counties looking to establish IFDs will have to demonstrate that their redevelopment agencies have met certain dissolution benchmarks, including remitting unencumbered balances to local taxing entities, complying with audit findings, and resolving any legal issues between the agency and the state.

As the details get hammered out, the budget will evolve. But the proposal set forth earlier this month gives us a good sense of the governor’s spending priorities moving forward. The emphasis placed on infrastructure upgrades, transportation funding, and new economic development tools appear to be moving the state toward a more sustainable future.


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