California Gov. Gavin Newsom has released a May Revision proposal for the 2024-25 fiscal year (FY) budget that ensures the budget is balanced during the next two fiscal years.
Under Gov. Newsom’s proposal, the state is projected to achieve a positive operating reserve balance not only in this budget year, but also in the next. The “budget year, plus one” proposal is designed to bring longer-term stability to state finances without delay and create an operating surplus in the 2025-26 budget year. The proposal is eliminating the 2024-25 deficit and eliminating a projected deficit for the 2025-26 budget year that is $27.6 billion (after taking an early budget action) and $28.4 billion, respectively.
In the years leading up to this May Revision, the Newsom Administration recognized the threats of an uncertain stock market and federal tax deadline delays – setting aside $38 billion in reserves that could be utilized for shortfalls.
“Even when revenues were booming, we were preparing for possible downturns by investing in reserves and paying down debts – that’s put us in a position to close budget gaps while protecting core services that Californians depend on. Without raising taxes on Californians, we’re delivering a balanced budget during two years that continues the progress we’ve fought so hard to achieve, from getting folks off the streets to addressing the climate crisis to keeping our communities safe,” said Gov. Newsom.
The revision maintains funding for transit projects and reduces active transportation funding by$300 million in 2025-26 and $99 million in 2026-27. The revision will shift $555.1 million from the state’s General Fund to the Greenhouse Gas Reduction Fund above what was proposed in the budget, for a total of $1.3 billion in proposed fund shifts for transit.
The governor’s office says the fund shifts are not expected to have any program impact and the May Revision maintains the Formula Transit and Intercity Rail Capital Program ($4 billion) and the Zero Emission Transit Capital Program ($1.1 billion) funding levels. The May Revision also reduces $148 million not used for awarded projects from the Competitive Transit and Intercity Rail Capital Program and maintains 96 percent of the Competitive Transit and Intercity Rail Capital Program ($3.5 billion of the originally planned $3.65 billion).
In a statement, California Transit Association Executive Director Michael Pimentel recognized the continued state support of transit systems but expressed his concern for frozen transit funding under the current FY (2023-2024) budget.
“In the face of a remaining $27.6 billion dollar deficit in the current year, we’re supportive of Governor Newsom’s proposed maintenance of the $5.1 billion in critical funding for California transit agencies that was previously approved to maintain core services and keep major sustainable transportation and rail capital projects on track. The preservation of the total funding level, however, comes with funding shifts and delays and we will be working closely with transit agencies across the state over the coming days to understand more fully the impacts these changes could have on transit-reliant riders and communities,” Pimental noted.
He continued, ”As we acknowledge Governor Newsom’s continued commitment to public transit in the May Revise, we continue to voice our concerns that the release of $2.4 billion in transit funding for the FY 2023-24, a component of the $5.1 billion total investment, remains frozen by the Newsom Administration. The association continues to urge the governor and Legislature to direct that this funding, which was supposed to flow to agencies no later than April 30, 2024, be released immediately. Until it’s distributed, the spending freeze imposes significant uncertainty around billions of dollars in one-time federal funding, project delivery timelines and operations planning.”
