The budget agreement reached by California Gov. Gavin Newsom and lawmakers late Monday provides a lifeline to struggling transit agencies, but comes with strings attached.

The parties negotiated all weekend without reaching an agreement, making it seem likely they would come barreling up to the Friday deadline ahead of the July 1, 2023-24 fiscal year start. If lawmakers don’t approve a budget by the deadline, they don’t get paid.

This year’s budget — unlike last year’s — involved closing a more than $30 billion revenue shortfall. In 2022, lawmakers approved a taxpayer rebate amid a $97 billion surplus.

“In the face of continued global economic uncertainty, this budget increases our fiscal discipline by growing our budget reserves to a record $38 billion, while preserving historic investments in public education, health care, climate, and public safety,” Newsom said in a joint press release with Democratic leaders. I want to thank the Legislature for their hard work on a budget that prioritizes the needs of Californians while keeping the state on strong economic footing.”

Sticking points included a proposal by lawmakers to fund a $5.1 billion bailout for struggling mass transit agencies. The Bay Area Toll Authority, more heavily dependent on fares than most transit agencies nationally, that rely heavily on sales or property tax, has been struggling mightily to recover post-pandemic.

Transit agencies will receive $5.1 billion over four years, but the money will be subject to accountability measures and state oversight. Sen. Scott Wiener, a San Francisco Democrat, authored a bill that would hike tolls on seven Bay Area bridges to further aid transit agencies. The proposal would bring in about $180 million annually.

Wiener’s toll hike bill was a last-minute gut and replacement of Senate Bill 532, that was near-and-dear to the muni industry. SB 532 would have ameliorated the impact on bond transparency laws that had a “chilling effect” on bond measure passage.

When Wiener introduced the bond language bill in February, he said he voted for the second of the two transparency bills, approved in 2015 and 2017, but they have not had the intended effect. SB 532 would have allowed information about the financial impact of ballot measures to be placed in the voter information guide, rather than having to fit all the information on a 75-word ballot.

Wiener’s communications director, Erik Mebust, told The Bond Buyer in an email that the senator used the gut-and-replace maneuver on the bill after a committee amended the original bill to the extent that it would not have accomplished what was originally intended.

“The amendments we were forced to take in the Senate Elections Committee severely undermined the bill and made it not worth advancing,” Mebust said. “We hope that at some point this gets fixed, but the amended bill wasn’t worth passing.”

According to analysts, BART ridership had also been down from pre-pandemic levels. But the failure of workers to return to the office five days a week, combined with tech industry layoffs, have placed San Francisco in a league of its own — as the city struggles with the kind of “donut syndrome” that had people fleeing east coast cities for the suburbs in the 1990s.

The agreement involves trailer bills that attach “new accountability measures for transit and homelessness investments,” Newsom said. “We are accelerating our global leadership on climate by fast-tracking the clean energy projects that will create cleaner air for generations to come.”

The Dream for All program, which offers state-backed home loans for first-time buyers, will receive an additional $200 million after having “its initial funding drained in less than two weeks after its implementation by eager buyers,” according to CalMatters.

The budget cuts $5 billion from climate change programs, including incentive programs for zero-emission vehicles, despite the governor banning new gas-powered cars in California by 2035.

Lawmakers are also seeking federal climate funding from the Inflation Reduction Act and the Infrastructure Investment and Jobs Act.

The budget includes $1 billion for local homelessness programs, but it’s only a third of the $3 billion lobbied for by a coalition of big-city mayors. The mayors contended during a press conference last month that the current approach of one-time annual grants from the state isn’t enough to staunch the continuing march of homelessness.

“We started our budget process this time around with tough economic challenges, but one overarching goal: to protect California’s progress,” Sen. President Pro Tempore Toni G. Atkins, a San Diego Democrat, said. “This budget does exactly that — it allows us to close the budget gap, make targeted new investments, and provide services and resources for Californians and our communities without cuts to core programs or dipping into our reserves, and in fact builds those reserves,”

“I’m also heartened that we were able to reach agreement on the infrastructure package, and in particular that we were able to do so in a way that focuses on equity by laying the groundwork to ensure that our most vulnerable communities will be hired first on impactful state infrastructure projects,” Atkins said.

Democrats pushed to include guarantees for workers in the budget document.

“This is a budget for the future,” Assembly Speaker Anthony Rendon, D-Lakewood, said. “The Assembly has consistently fought for early childhood education and I’m proud that this budget includes up to $2.83 billion in one-time funds for childcare reimbursement increases, all while protecting budget reserves of $37.8 billion.”