CA League of Cities Update May 14th

Earlier today, Governor Newsom released his May Revision budget proposal, which the League has compiled a preliminary analysis for cities.  As anticipated, with the projected $54 billion shortfall announced last week, Governor Newsom is proposing a multiyear recovery approach that significantly draws down nearly all available reserves while delivering a balanced budget.  The May Revision budget proposal is scaled down to $203 billion from the $222.2 billion proposed in January, as the state faces its first deficit in eight years. The Governor’s focus is on the protection of California’s core values: public education, public health, public safety, and people hit hardest by COVID-19.The May Revision includes details on the state’s fiscal outlook in context of present and future risks to the state, national, and global economy, including prolonged disruption from the pandemic and public health response. As the state plans through a multiyear or decade-long recovery, the budget plan highlights climate change, housing affordability, aging population, lower fertility rates, and slowing migration as key risks to the California economy.  The May Revision proposes to use $16.2 billion in the Budget Stabilization Account (Rainy Day Fund) over three years, cancel planned or previously proposed program expansions, spend available federal funds, and build automatic budget controls in the event that new federal stimulus dollars are approved.  There does not appear to be any state taking or borrowing of city revenues. The League will provide additional updates and analysis as we continue to work through the details.  The U.S. House of Representatives still is scheduled to vote on the HEROES Act tomorrow with continued efforts to secure the necessary votes for passage this evening.

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