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New budget means a $6B cut, and future uncertainty, for California climate spending

For climate advocates, a growing state deficit offers some bad news, some good news and a good deal of uncertainty in the revised California 2023-24 budget Gov. Gavin Newsom presented Friday morning.

The bad news is that, despite lobbying efforts and environmentalists pitching at least two alternative proposals, the revised budget still includes the $6 billion in cuts to climate spending over the next few years that Newsom proposed in January. If those cuts stand, they’ll mean significant hits to funds that previously were pledged to help speed California’s transition to non-polluting cars, clean up the water supply, decarbonize buildings and protect people against the effects of extreme heat.

The good news is that despite the state’s projected budget shortfall jumping from January’s estimate of $22.5 billion to the new estimate of $31.8 billion, the state isn’t planning additional cuts for climate projects. That leaves intact a five-year plan to spend $48 billion on climate.

“We were really expecting there to be another round of massive cuts to the climate budget,” said Jamie Pew, climate fellow with the progressive group NextGen Policy. So, Pew said, the organization is happy with the plan released Friday.

“A budget is a statement of value. This shows that the administration is holding the line on climate spending even in the face of these severe economic headwinds.”

But even that good news is shrouded in a bit of uncertainty. Newsom is proposing to cover the additional deficit, in part, by working with lawmakers to pass a “climate resiliency bond” that could be used in place of state general fund money to pay for some planned projects.

Few details, including the total amount of that proposed bond, were available Friday. But if the bond doesn’t pass, that means another $1.1 billion in funding for water recycling, urban greening programs, Salton Sea restoration and other environmental programs still could be on the chopping block.

That possibility raises concerns for Power in Nature, a coalition of more than 100 community, environmental and tribal groups in California. While the coalition said in a statement that members are glad to see a bond under consideration, they’re worried about pinning “important parks, urban greening and restoration programs” on a bond that wouldn’t come up for a vote until at least 2024 and kick in until 2025.

Ironically, Newsom said some of the uncertainty both the California and federal governments are now facing around their finances is related to climate change-induced “extreme weather events.” Tax filing deadlines were pushed to October for most Californians, after a series of unusual storms pounded the state this winter and early spring. That means governments are operating based on revenue projections, rather than hard numbers.

The storms also prompted Newsom in this revised budget to allocate $290 million in new funding to flood prevention programs, to guard against disaster as record snowpack melts into the summer. Nearly half of that funding came from money that had been set aside for drought prevention efforts, while California Finance Director Joe Stephenshaw said they were able to move funds around to come up with the rest.

Those sorts of impacts illustrate why California has to maintain as much funding as possible for climate projects, Newsom said.

Along with speaking broadly about a climate bond, Newsom also teased a planned announcement next week to revise permitting in a way that will let clean energy, transportation, water storage and other projects move forward more quickly and with less paperwork. Asked if he was suggesting changes to the landmark California Environmental Quality Act, Newsom declined to go into detail until next week.

The governor also did not consider two alternative budget proposals pitched in recent days that advocates say could have helped the state avoid such drastic cuts to climate funding.

Nearly three dozen environmental, health and consumer organizations sent Newsom a letter Tuesday asking him to close the budget gap in part by eliminating subsidies and tax benefits for the oil and gas industry rather than cutting funds for climate projects.

“Subsidizing polluters is antithetical to California’s climate goals, and particularly egregious when the Administration is proposing a $6 billion cut to the $54 billion earmarked in 2022 to protect communities from climate change and grow the clean energy economy,” Arnold Sowell Jr., executive director of NextGen California, said in a statement regarding the proposal.

Noting that Big Oil earned record-breaking profits last year, the groups identified nearly $8.7 billion in tax credits that benefit California oil companies, including write-offs for research and development, drilling and more. They argued that cutting subsidies to these companies could support ongoing funding for climate investments, so such projects could advance even during years when there isn’t a budget surplus.

“Each tax break and subsidy we give fossil fuels is a dollar taken away from growing the green alternatives we need so badly,” said Liza Tucker, consumer advocate with Consumer Watchdog.

State Senate Democrats last week also proposed using corporate tax hikes — but in this case on big companies of all sorts, rather than just oil and gas — to prevent budget cuts to key programs. They specifically called for restoring $2.1 billion that had previously been pledged for clean energy projects, including funding for electric vehicle incentives and charging programs, efforts to reduce emissions from public transit and school buses, residential solar and storage projects and more.

Senate Democrats pitched the budget proposal, which they called Protect our Progress, as simply reversing some of the tax cuts the top 0.2% of corporations received under former President Donald Trump’s 2017 tax plan. But Newsom said he doesn’t think it’s the right time to consider a tax hike, with the state coming out of record surplus years that still have them sending rebates back to residents.

It’s also not the right time to dip into the $100 billion in rainy day reserve funds California has now accumulated to avoid these cuts, Newsom said.

Stephenshaw said they’re anticipating budget shortfalls of $5 billion to $14 billion for the next several years. So they want to leave those reserve funds in place so they won’t need to make any serious cuts to services if those deficits pan out as projected.

Newsom and his team will now spend the next month negotiating with the state legislature over the proposed budget.

The legislature has until June 15 to pass the new budget, which will take effect July 1.

This is a developing story. Check back later for details.

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