Gavin Newsom’s Budget Contains a Radical Housing Plan for Cities and Counties

Governor Gavin Newsom released his first state budget proposal Thursday. It calls for $144 billion in new general fund spending — an increase of 4% — plus another $13.6 billion for “budgetary resiliency,” i.e. state reserves, paying down the debt, and reducing the state’s pension liabilities. K-12 education received over 40% of the total budget allotment for 2019-2020, while health programs comprised another 21%.

California’s housing crisis was also a major feature of the governor’s spending proposal. And on that issue, he proposed his most aggressive idea yet. Using a carrot-and-stick approach, Newsom offered cities and counties a choice: $500 million for those that build new housing — and the possible loss of transportation funds for those that don’t. 

At his budget unveiling, Newsom specifically threatened to withhold SB 1 gas tax funds from local governments that fail to meet housing goals.

“If you’re not hitting your goals, I don’t know why you get the money,” he said.

That troubled local government and transportation advocates who said such a move would undermine local governments and thwart the will of voters who opted to uphold SB 1 in November.

The California State Association of Counties has already come out in opposition to the idea. League of California Cities Assistant Legislative Director Jason Rhine notes that the ability of cities to meet housing goals is often out of their control.

“You can’t set a goal that’s not achievable, and then penalize us with transportation dollars that aren’t there," he said, as quoted by California Public Radio.

Newsom would like to see the state build 3.5 million more housing units over the next seven years, which is about four times what it is producing right now. His budget proposes around $2.3 billion in new spending for housing and homelessness initiatives.

Read a copy and summary of the governor’s budget proposal here.