Highlights of California governor's second annual budget

California Democratic Gov. Gavin Newsom presented a $222 billion budget proposal to state lawmakers Friday, Jan. 10, setting off six months of hearings and negotiations before the Legislature must act by mid-June, in time for the new fiscal year that begins July 1. The state also will have an estimated $107 billion in federal funds to spend in the next budget year. Some of Newsom's major proposals include:

Health care

Newsom would provide coverage for 27,000 older low-income immigrants who are in the country illegally, starting next year with an initial outlay of $80 million. California last year became the first state to offer full health benefits to low-income adults 25 and younger living in the country illegally. Of about 3 million people who don't have any health insurance, advocates said about 30% are undocumented immigrants.

Newsom wants California to become the first state to sell its own prescription drugs. The CalRX label would "take the power out of the hands of greedy pharmaceutical companies," he said. California would contract with competing generic drug companies on behalf of its nearly 40 million residents and create a single market for drug pricing. Companies would have to bid to sell their medicine at a uniform price. Republican Assemblyman Devon Mathis, who sits on a health subcommittee, warned that "When the state runs it, it costs more money."

To curb vaping, the governor also proposed a tax of $2 per each 40 grams of nicotine in electronic cigarette products, which he said was similar to the tax on cigarettes. The tax would generate an estimated $32 million in its first six months that would help fund prevention programs and law enforcement.

Housing and homelessness

Newsom signed an executive order Wednesday, Jan. 8, creating what he proposes to be a $750 million fund that providers could use to pay rents, fund affordable housing or help board and care homes. He's seeking another $695 million in state and federal matching funds for preventive health care, but some of the money could also go to helping people find housing.

The self-proclaimed state "homeless czar" directed the state to provide 100 travel trailers and modular tent structures to cities and counties for use as temporary housing. He ordered state agencies to free surplus state property to house homeless people including alongside highways, in unused health care facilities and on state fairgrounds. And he's seeking nearly $25 million for three counties to experiment with putting those who are deemed mentally incompetent to stand trial into community programs instead of state psychiatric hospitals.

Wildfires

Newsom proposed hiring 555 firefighters over five years, providing relief to the existing 4,800 firefighters who sometimes battle blazes for weeks at a time. He also wants to spend $100 million to make lower-income housing more resistant to wildfires with steps like replacing wooden roofs and filling gaps where embers can alight.

It's part of a $2 billion emergency services budget proposal that also includes flood protection and high-tech mapping of areas prone to wildfires, floods, tsunamis and mudslides. It would fund a new Wildfire Forecast and Threat Intelligence Integration Center and research on better firefighting equipment and ways to protect firefighters.

Another half-billion dollars would go protecting things like water systems and public medical facilities from wildfires, and creating emergency shelters in places like fairgrounds. Communities would share $50 million in matching funds to help things like schools and county election offices prepare for utilities' widespread planned power outages. A quarter-billion dollars would go to improving the health of forests.

Pacific Gas and Electric

Newsom's proposal includes a possible attempt to take over Pacific Gas and Electric unless the state's largest utility can minimize its chances of endangering lives and its practice of deliberately turning off the power when wildfire danger is high to prevent its transmission lines igniting fires.

Newsom and other government officials have repeatedly threatened to turn the utility into a government-owned entity since it sought bankruptcy protection a year ago as a refuge from an estimated $50 billion in losses from deadly fires blamed on its outdated electrical grid. Newsom didn't estimate how much this "break the glass" scenario might cost the state but pledged to ensure any takeover wouldn't sink California into a deep financial hole.

A takeover bid would likely cost a lot, given PG&E's current market value stands at $6 billion after peaking at $37 billion in 2017. PG&E is currently seeking approval of its own plan that would maintain the company's status as a for-profit business with improved maintenance and operations.

K-12 education

The governor proposed spending $84 billion on K-12 education and community colleges, which includes increases to attract more teachers and higher spending on special education programs.

"75% of the districts have teacher shortages," he said.

Referring to a review he requested to study why California's schools are under-performing, Newsom said, "It's not that complicated. Train your teachers, make them the best, brightest. Incentivize."

His proposed budget allocates $900 million for teacher recruitment and another $895 million for special education programs that focus on training and diagnosing learning. Newsom also wants a $20,000 stipend for teachers who stay four years at high-need schools, which alone would eat up $100 million. Newsom said that's a worthy investment.

Newsom wants to create a new Department of Early Childhood Development and touted the importance of investing in special education programs, noting that he benefited from them as a child who struggled with dyslexia and speech issues. Overall spending per pupil would increase $496 to $17,964, combining state and federal funds, though much of that is being eaten up by pension funding costs for teachers.

Higher Education

The governor proposed $21 billion for higher education – including increases of more than 5% each to the University of California and California State University systems. The 10-campus University of California system would see a $218 million increase, which Newsom said is dependent on his expectation it will continue focusing on college affordability, improved access for students, more graduations within four years and reducing achievement gaps.

Newsom would also boost the 23-campus California State University system's budget by $230 million. Democratic Assemblyman Jose Medina applauded the increases as "critical to keeping California's institutions of higher education a pinnacle of excellence." But the Riverside lawmaker said the state needs to do more to address rising college costs and ensure that financially disadvantaged students get tuition help.

Climate change

The budget includes plans to invest $12.5 billion over the next five years for resiliency measures. The funding anticipates that voters will approve a $4.7 billion bond in November to support the expenditures. An equal share would come from the state's cap-and-trade program for pollution reduction.

Climate resilience is woven through the budget in sections on natural resources, wildfires and transportation.

Spending plans include a $250 million revolving low-interest loan program – expected to grow to $1 billion over five years – that would invest in green technology such as clean vehicles, smarter farming practices and better recycling programs.

The focus of priorities would be more about adapting to climate change rather than lessening its impact, Lisa Lien-Mager, representative for the California Natural Resources Agency, said.

Consumer protection

The governor is proposing to reorganize the Department of Business Oversight and rename it the Department of Financial Protection and Innovation. Newsom said it would let California protect consumers from predatory businesses in response to President Donald Trump's administration reducing federal consumer financial protections.

Law enforcement

Newsom wants to expand on existing programs that let younger inmates participate in more rehabilitative programs by creating campus-like settings within state prisons where 5,800 offenders under age 26 would live, study and work.

He also proposed closing a state prison – but not for several more years, given that the state remains under a federal court-ordered population cap. Newsom similarly hopes to close four of the state's six contract prison facilities in the next fiscal year – three of them operated privately – as the state continues an effort that last year brought the last inmates back from private prisons in other states.

Newsom's corrections department budget would grow by nearly $1 billion, from a proposed $12.6 billion a year ago to $13.4 billion next fiscal year.

The governor proposed to shorten probation to a maximum of two years – down from five for felonies – saying that most of the benefit comes in early months. But he also proposed intensifying services for those serving probation for misdemeanors to counter a rash of car burglaries and other property crimes.