Cal Cities urges lawmakers to draw on budget surplus to fund new housing program, organic waste recycling, and past due mandate costs

The state’s $20 billion budget surplus is expected to grow by billions more next month, giving lawmakers another opportunity to make historic investments in California. In a series of letters to lawmakers, the League of California Cities called upon the state to use a portion of the surplus to establish a new housing and economic development program, reimburse local governments for state-mandated costs that have not been paid, and help fund organic waste recycling programs.

$500 million for a new housing and economic development program

The supply and affordability of housing is one of California’s most persistent, high-profile issues. For more than a decade, local leaders have asked for long-term funding to help jumpstart the construction of affordable housing and support economic development activities, but have only received one-time commitments that, while helpful, fall short of the long-term investments needed.

Cal Cities is urging lawmakers to allocate $500 million in the 2022-23 State Budget for a new housing and economic development program . This program would encourage partnerships between state and local agencies by providing matching funds to cities that adopt local tax increment financing tools to support affordable housing, upgrade essential infrastructure, and spur economic development.

Although tax tools like Enhanced Infrastructure Financing Districts help stimulate housing production, they lack sufficient financial capacity, due in part to the absence of state participation. As such, they are often underused. The establishment of a state-local partnership to provide matching funds would be a gamechanger and greatly expand the viability of these tools.

A strong state-local partnership would propel significant investments in affordable housing, public infrastructure, and spur much-needed economic development and job creation, all of which would help further the state’s ambitious housing goals.

$933.5 million for unfunded state mandates

According to data obtained from the State Controller’s Office, the state owes cities, counties, and special districts more than $933.5 million for costs related to state mandates incurred after 2004. Of that amount, $466.6 million — not counting interest — is owed to cities. Cal Cities and others are calling on the state to reimburse the full amount by appropriating $933.5 million in the 2022-23 State Budget for unfunded mandate costs.

State-mandated activities which incurred costs by cities and were deemed reimbursable by the Commission on State Mandates, include a wide variety of essential programs and services, such as those related to public meetings, identity theft, domestic violence, child abuse, and crime reports.

Although the state is required to suspend any mandate that is not funded during a given budget cycle, cities usually have little choice but to continue the activities associated with the unfunded mandates. In many cases, the program is already in operation when a mandate is suspended. In other cases, local compliance efforts must be maintained to meet public service expectations.

The pandemic demonstrated the vital role that cities play in California's economy and the important services they provide to the public. City budgets and financial stability are critical to the economic success of the state and cities rely on the state reimbursing them for state-mandated program costs.

$180 million for SB 1383 organic waste recycling programs

Cal Cities and a coalition of local government associations are also asking the state to include $180 million in the 2022-23 State Budget to help cities and counties develop and implement SB 1383 (Lara, 2016) organic waste recycling programs.

SB 1383 aims to reduce landfill disposal of organic waste by 75% and to increase edible food waste recovery by 20%. Once in landfills, food waste generates methane, a greenhouse gas dramatically more potent than carbon dioxide. 

The requested $180 million in funding would build on the $60 million in grant funding approved by the Legislature in 2021, the largest amount ever set aside for cities in a single fiscal year for SB 1383 implementation. This additional funding for the grant program would help local governments implement collection, education, outreach, edible food recovery, procurement activities, and capacity planning.

Hundreds of city leaders will gather in Sacramento for the Cal Cities City Leaders Summit next month and will be urging lawmakers during meetings in the Capitol to include funding for the new housing program, organic waste recycling, and unpaid state-mandated costs in the 2022-23 State Budget.