trending Market Intelligence /marketintelligence/en/news-insights/trending/hyNiS2h2rAxZ7lfmU7d_zA2 content
Log in to other products

Login to Market Intelligence Platform

 /


Looking for more?

Contact Us
In This List

'Uncertain times': Calif. governor eyes wildfire, housing crises in 1st budget

Q2: U.S. Solar and Wind Power by the Numbers

Essential Energy Insights - September 17, 2020

Essential Energy Insights September 2020

Rate case activity slips, COVID-19 proceedings remain at the forefront in August


'Uncertain times': Calif. governor eyes wildfire, housing crises in 1st budget

SNL Image

California's new governor, Gavin Newsom (left), speaks with President Donald Trump in wildfire-ravaged
Paradise, Calif., in November 2018,
trailed by former Gov. Jerry Brown.
Source: Associated Press

Freshly sworn into office, California Gov. Gavin Newsom on Jan. 10 pitched $209 billion for the state's 2019-2020 budget, a roughly $8 billion boost from former Gov. Jerry Brown's final budget. The proposal to state lawmakers, highlighted by more money for housing, education and wildfires, also features cuts for the state's cap-and-trade program, a key part of California's strategy to slash greenhouse gas emissions.

"Bottom line, we recognize the prevailing winds: a global economy that is contracting, interest rates that are rising, the volatility that exists not just in our body politic but our stock market, and the anxiety that many of us are feeling around this moment in time," Newsom said at a news conference. "We are preparing for uncertain times."

The budget assumes an economic growth rate for the nation's largest state economy of just over 3%, the governor said, down from a recent average of around 5%.

Newsom takes the reins with California's coffers "in remarkably good shape," according to the state's Legislative Analyst's Office, which in November 2018 forecast $14.5 billion in budget reserves for the 2019-2020 fiscal period, in addition to nearly $15 billion in available allocations. Newsom, a former lieutenant governor and ex-mayor of San Francisco, wants to increase the state's rainy day fund to more than $15 billion in 2019 and to around $20 billion over four years.

Wildfire worries

Pointing to "climate change-driven" and "utility-caused" wildfires that have scorched the state in recent years, the budget proposal includes $2.6 billion for the Department of Forestry and Fire Protection, or Cal Fire, slightly up from Brown's last budget. Newsom also committed to spending $1 billion on a five-year forest management plan.

"I wish the president listened to this press conference the day before he tweeted," Newsom said, referring to President Donald Trump's criticism of California's forest management.

In a Jan. 8 letter to Trump, Newsom joined Oregon Gov. Kate Brown and Washington Gov. Jay Inslee in requesting the president double the federal government's spending for federal forest management in the three West Coast states. Since 2016, budget cuts for the U.S. Forest Service have reduced "the agency's capacity to manage federal forestland in California," according to Newsom's office.

California's efforts to prevent and recover from wildfires come as the state's largest utility, PG&E Corp.'s Pacific Gas and Electric Co., confronts an existential crisis related to wildfire liabilities. Newsom's budget does not directly address PG&E but does include $21 million for various departments to ramp up their fire-related activities, including wildfire cost-recovery proceedings at the California Public Utilities Commission.

Newsom said he would make an announcement on the utility in coming days.

SNL Image

Newsom's budget proposal calls for a $400 million reduction in investments through the state's cap-and-trade program compared to Brown's last budget.

"I know that's not good news, but it's because so many of the [carbon] allowances were oversubscribed," the governor said.

His proposed $1 billion cap-and-trade spending plan includes $200 million for Cal Fire to improve forest health and $637 million for clean transportation and other environmental programs at the California Air Resources Board.

Overall, the state's Natural Resources Agency, which includes Cal Fire, the California Energy Commission and other departments, would see a roughly 7% drop in total funding to $6.4 billion, while the state's Environmental Protection Agency would receive a nearly 2% increase to $4.2 billion.

Eyeing California's "housing crisis," the budget proposal includes $1.3 billion to boost construction of homes, particularly in low-to-medium price ranges. To keep up with population growth, California must build 200,000 homes per year, compared to only 113,000 permitted in 2017, the budget proposal said.

Addressing the state's housing shortfall would also benefit rooftop solar, given California's recent building code update that mandated solar on all new single-family homes and low-rise apartment buildings starting in 2020.