The next state budget would remain three times the size it was a decade ago under a new plan Gov. Gavin Newsom unveiled on Tuesday. With a projected $22.5 billion budget deficit, the administration would cut climate-smart grants 10% while adding millions more for flood protection and potential drought response.

“Nothing about this presentation should surprise anybody,” said Newsom, referring to the steady drumbeat of economic forecasts in recent months warning of a potential recession. “We're in a very volatile moment.”

According to the budget summary, considerable risks to the economy remain and more difficult decisions are ahead if the state slips into a recession in the coming months. The plan calls for delaying some funding, pulling back on previous allocations and shifting money from cap-and-trade revenues to zero-emission vehicle (ZEV) programs and elsewhere.

Yet the $297 billion budget proposal would maintain 89% of the $54 billion in spending the state approved last year to finance a five-year climate agenda. But most of the belt tightening would come in the 2023-24 budget, with a $4.6 billion cut.

ZEV investments for heavy-duty trucks and buses would drop by $1.5 billion to a $5.3 billion pot. On the energy side for agriculture, the Food Production Investment Program for decarbonizing food production would lose $10 million but keep a healthy $65 million.

The budget would maintain nearly 90% of a $1.1 billion climate-smart agriculture package to be spent over multiple years. Programs that face a 10% reduction would span areas like healthy soils, sustainable cannabis, pollinator habitats, conservation farming and invasive species. The administration would cut in half spending for training new farmers and farm managers, leaving $5 million for the new program. In a separate call with stakeholders, CDFA Secretary Karen Ross promised the budget would protect the full investment in methane reduction programs for manure management and dairy digesters.

Jim HoustonCalifornia Farm Bureau Administrator Jim Houston

The governor, who left soon after the presentation to tour flooded communities in the Central Coast, hopes to dedicate an additional $202 million to flood protection, building on $1.9 billion in spending since 2019. The money would support urban projects, shore up Delta levees and reduce flood risk in Central Valley regions “while contributing to ecosystem restoration and agricultural sustainability,” according to the plan.

The administration is preserving $75 million approved in September for drought relief to small agricultural businesses and hopes to set aside $125 million for additional drought response if conditions deteriorate this spring. The budget would provide $31.5 million to the State Water Resources Control Board to update water rights data to “enhance California’s water management capabilities.”

When pressed on water storage investments, the administration often points to spending on water efficiency programs. The CDFA program known as SWEEP (State Water Efficiency and Enhancement Program) would lose $40 million, though it would keep $120 million.

Overall spending for the Natural Resources Agency is down 37% while CalEPA faces a 7% drop. Yet the cuts can be restored next year if the state’s fiscal standing improves.

Despite the drop in spending, the budget situation is far from a return to the dire situation CDFA and other agencies faced in the wake of the Great Recession. Jim Houston was the lone CDFA deputy out a dozen who survived the layoffs when the department lost a third of its budget. Now the administrator of the California Farm Bureau, Houston spurns the “profligate spending” at the state level.

“Those days are over,” Houston told Agri-Pulse. “I’m hoping for a little bit of responsibility in the budget that’s proposed.”

He argued the new spending obligations would still dwarf the $35.6 billion set aside as a reserve. The administration has taken the advice of the Legislative Analyst’s Office and kept the reserve fund intact as a savings account for a recession. He lamented that any cuts to climate grants for producers or to the water supply means that less carbon is turned into food.

“You've got the double whammy of an economic hit but up you’ve also lost the human and environmental benefits associated with food production,” he said.

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Houston interpreted the funding for modernizing the water rights system as a “smoke signal for funding activities that would potentially undermine” existing rights. The farm bureau spent the last legislative session fighting off bills and executive orders that sought to overhaul aspects of the system. He called for putting that money instead into capturing more flood flows for storage.

“If we've learned anything over the past week, it's that California really has an infrastructure deficit,” he said, adding that he believes about 91% of the water falling on the state this month is going out to the ocean. “Hopefully folks will pay enough attention to the lack of capture now.”

Ahead of the budget release, the Senate Republican Caucus in the Legislature called for expanding water storage, reasoning the parade of storms shows the importance of building Sites Reservoir and upgrading conveyance canals. In response, Newsom said he put strike teams on each of the seven project proposals the Water Commission is considering for Proposition 1 funding, including Sites.

“I've made it crystal clear to my agency directors and department heads: What are the bottlenecks and how can we clear them?” said Newsom. “Process is creating paralysis and creating problems as a consequence. We have a responsibility to fix that.”

Republican Sen. Roger Niello of Fair Oaks also blamed “overspending on misguided priorities” for leading the state to a budget deficit, while Senate Minority Leader Brian Jones of San Diego argued the governor broke his promise to pay down the unemployment insurance debt: “Instead he leaves small businesses to bear the brunt of the state’s failures.”

Chris Reardon, who spent a decade working at the Department of Pesticide Regulation and now directs government relations for the California Farm Bureau, pointed out that it is still early in the game for the budget process. Many of the proposals are subject to change through negotiations with the Legislature and as the state gathers a more accurate accounting of tax revenues ahead of the May revision of the governor’s budget proposal. Lawmakers have until June to pass a budget framework and will likely flesh out that spending through end-of-session budget trailer bills months later.

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