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Nonprofits Reaching for Piece of CA Budget Pie

04.11.22 | Linda J. Rosenthal, JD
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“The annual state budget is – next to the State Constitution – the most important document in California government.”

That’s how Senate writers in Sacramento open the helpful 20-page PDF booklet titled The Budget Process: A Citizens’ Guide to Participation. And next in the Introduction, they remind us that if “… California were a nation,” it would rank among “the top ten economies in the world.”

Each year, this “open public process” of approving the budget ahead of the start of the fiscal year on July 1st “gets going with intensity when the governor presents a constitutionally mandated proposed balanced budget on or before each January 10th.”

The ball is then tossed to the Legislature which has until June 15th to act on it. “This five-month period–a comparatively short time frame for consideration and passage of the state’s multi-billion dollar general fund budget–is the critical period for public comment on the state’s spending priorities.”

And “so it begins,” wrote Jeremy B. White and his co-authors at Politico on the morning of January 10, 2022, in California begins its budget dance:  “Like the return of migratory birds to rice fields, an annual California politics ritual will occur this morning as Gov. Gavin Newsom unveils his budget proposal for the next fiscal year.” See The 2022-23 Governor’s Budget,  showing a huge surplus.

Wait. What? There are rice fields in California?

A Big Deal

The Politico reporters continue: “Today California […launches…] back into the perennial debate over how to spread its wealth around – and there are abundant assets to allocate.”

“Keep in mind,” they add, “that this represents a prelude to a prelude: the truly important negotiations tend to start after Newsom releases” a required May update, reflecting more solid actual numbers. But, however “much the budget plan morphs between [January 10th] and May, it would take an abrupt economic downturn to reverse the state’s trajectory.”

This is “no ordinary year; … the defining fiscal dimension is that we’re in a time of plenty. Months after enacting a record $262 billion budget, California’s coffers are once again overflowing, with a surplus in the tens of billions.” (An interesting point is that most other U.S. jurisdictions are also suddenly experiencing surpluses: a development almost unimaginable until just recently.)

The $29-billion surplus to allocate “does not include about $13 billion set aside, through a constitutional mandate, for schools and community colleges.” This is “an excess ample enough that California could breach the spending cap known as the Gann limit, which would force the state to return some of that money to taxpayers.”

The total financial picture in California is also buoyed by California’s largest-in-the-nation share of The Coronavirus State and Local Fiscal Recovery Funds (SLFRF) program, a part of the American Rescue Plan that “delivers $350 billion to state, local, and Tribal governments across the country to support their response to and recovery from the COVID-19 public health emergency.”

These funds are available to be disbursed over a few years and for a broad range of allowable purposes. For the record, in most if not all U.S. jurisdictions, there’s plenty of money left in that Fund for good reasons; most notably, it’s been predictably challenging for state and local governments to rapidly scale up to accept, process, and disburse such huge cash windfalls.

Budget Watching

The California Association of Nonprofits (CalNonprofits) has recently reminded us that springtime is when our community must pay close attention not only to purely legislative developments in the Senate and Assembly but also to budget deliberations in the relevant committees. See CA Nonprofit Legislative Update (April 5, 2022), citing Bills & Budget Asks Supported by CalNonprofits in 2022 (March 2022).

There are two specific budget proposals that CalNonprofits is supporting as of now: (a) a $10 million outreach and sub-grant program regarding the federal student loan forgiveness program and waivers; and (b) funding for a $100-million annual “community-based approach to health equity and racial justice.”

  • PSLF Outreach

The federal Public Service Loan Forgiveness program has received a great deal of attention in the last year or so in terms of its past dysfunction as well as from significant efforts by the Biden Administration to revamp it so it meets the original intention and purpose to provide a student-loan cancellation program for eligible workers at nonprofits and government entities.

See our discussion in Public Service Loan Forgiveness: Glitches (April 15, 2019). This program was created in 2007 as an “excellent way to help both struggling college grads as well as the nation’s government agencies and nonprofit organizations to lure needed talent away from the private sector which – generally – pays better than public service jobs….” But at the end of the 10-year-period when the first of the loan cancellations should have occurred, few applicants were granted the statutory relief.

The program has now been overhauled; see Nonprofits & Student-Loan Forgiveness: Action Needed (August 24, 2021), and Student Loan Forgiveness Program: “Transformational” Fixes (October 7, 2021).

But it’s still difficult to navigate the new processes. CalNonprofits created the Nonprofit Student Debt Project, an “initiative to educate nonprofit staff and employers, advocate for public policy changes, and engage [the nonprofit] community on the problem of student debt and its impact on the nonprofit workforce – and what we can do about it.”

And now, CalNonprofits is supporting a $10 million request by the CA Department of Financial Protection and Innovation “to do outreach, and sub-grant funds to nonprofits to do outreach, on the federal PSLF program and waiver.”  CalNonprofits is “part of a coalition of organizations working to bring better information and support to student loan borrowers.” In 2020, the organization supported a bill (AB 376 – Stone) that provides an ombudsperson and other resources for student borrowers in California.

  • Public Health Advocacy

CalNonprofits also supports a request to fund a community-based approach to health equity and racial justice. “A statewide coalition of nonprofit advocates that engage in public health advocacy on behalf of underserved communities is requesting at least $100 million a year to support public-private partnerships to improve a wide range of public health outcomes in communities with less access to resources.”

The Health Equity and Racial Justice Fund explains its mission: “As the pandemic rages on, California must invest in addressing the root causes of health inequities and racial injustices by directing resources to communities that have long-standing health inequities that have only been exacerbated by COVID-19….”  The Fund would provide money “directly to community-based organizations, clinics, and tribal organizations (CBOs) to identify the most pressing health and racial justice issues in their communities and develop solutions to address them.”  Funding priorities could include “food security, environmental justice, community safety, and more.”

CalNonprofits explains that “this broad definition of public health outcomes means that many types of nonprofits can support local efforts ….”

A Piece of the Pie

The most intriguing – and little known – aspect of the annual California budget “dance” is how significantly the general public (either individually or collectively through interest groups or as organizational “stakeholders”) is invited and encouraged to participate in the process.

Between the reveal of the governor’s budget by January 10th and the “release of the May Revision …, the Legislature’s Senate and Assembly Budget Committees and their policy-specific sub-committees will invite the Department of Finance and State Departments to present the Governor’s January Budget to those committees….”

More particularly, they “will also allow for stakeholders to provide public comment on the Governor’s proposals as well as present their own ‘stakeholder proposals’.”

It’s important to understand, though, that “… these committees will not take any action on the Governor’s budget proposals or on the stakeholder proposals and will instead ‘hold them open’ until after the May Revision is released.” That’s why the Politico article made clear that “… the truly important negotiations tend to start after Newsom releases” the required May budget update and “revised fiscal outlook.”

After that, “the Legislature’s Budget subcommittees and Full Budget committees will meet and either approve or reject the Governor’s and stakeholders’ proposals. The Legislature and the Governor will then negotiate to produce a final budget.”

A simple Google search reveals considerable input already by many California nonprofits. A quick peek at one or more of the following examples shows how much there is for our sector to chew on within the proposed budget:

Conclusion

The Legislature must produce a “balanced budget” by majority vote of both the Senate and the Assembly by Wednesday, June 15, 2022. Governor Newsom will then have 15 days to sign it so that it will be law by Friday, July 1, 2022, the start of the new fiscal year.

It should be quite an interesting few months.

           — Linda J. Rosenthal, J.D., FPLG Information & Research Director 

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