May revision shifts greenhouse-gas funds to Cal Fire and proposes $1 billion annual floor for high-speed rail

The May revision presented by the Department of Finance proposes a notable reallocation of greenhouse-gas auction proceeds and other GGRF priorities tied to the state's budget fix. The administration's top GGRF priorities are continued funding for the High-Speed Rail Authority and a general‑fund shift to the greenhouse gas reduction fund to support CAL FIRE operations.

"The administration's top two priorities are continued funding for the high speed rail authority, of at least $1,000,000,000 annually, and a general fund solution to shift $1,500,000,000 from the general fund to the greenhouse gas reduction fund to support fire prevention, fire control, and resource management operations costs at CAL FIRE," Andrew March of the Department of Finance said.

The May revision also proposes a GGRF backstop to protect CAL FIRE operations in the event auction proceeds fall short; Finance officials said they would use general‑fund resources in that case to keep CAL FIRE whole. Rachel Ehlers of the Legislative Analyst's Office (LAO) told the committee the governor's revenue estimates are “in the ballpark” and the LAO supports multi‑year solutions that shore up reserves; the LAO warned the May revision’s use of GGRF represents trade‑offs that reduce discretionary climate spending and said policy proposals that are not essential to passing the budget could be deferred.

Committee members pressed the administration on the practical effects. Officials said the May revision's GGRF plan would leave remaining auction proceeds for later negotiation with the Legislature and that continuous appropriations for certain programs remain unchanged absent legislative action. "Mechanically under the current structure for GGRF… in order to, as LAO calls it, make room for the CAL FIRE fund shift, the 2024 discretionary plan for GGRF is not included in the May vision," a Department of Finance official said. The administration characterized its submission as opening a negotiation with the Legislature rather than final enacted allocations.

High-Speed Rail: the administration proposed a firm minimum annual allocation in the renewed GGRF spending plan as part of a multi-year cash‑flow strategy. High-Speed Rail Authority officials told the committee $1 billion annually through 2045 could allow construction of the Merced–Bakersfield segment and would provide stable cash flow that could enable private‑sector financing options. "That will allow us to essentially complete the Merced to Bakersfield segment," Mark Tolleson, chief of staff at the High Speed Rail Authority, said.

LAO highlighted uncertainty: the authority's cost estimates assume retention of approximately $3 billion in federal funds that could be at risk, and the authority currently shows a funding gap in the Merced–Bakersfield segment that could widen if federal funds are reduced. LAO also warned securitization and other financing approaches carry additional costs and risks that will require more detail.

Transportation and other discretionary programs: lawmakers expressed concern that the administration's priorities would squeeze other ongoing and discretionary GGRF commitments, including transit capital and zero‑emission vehicle programs. Department of Finance said remaining proceeds would be available for negotiation and that continuous appropriations are unchanged without further legislative action; LAO said the Legislature should act if it wants to protect previously anticipated discretionary allocations.

What happens next: the May revision places these GGRF priorities in the administration's opening budget, and the Legislature must decide whether to adopt the spending plan, modify continuous appropriations, or craft a different GGRF reauthorization. Officials repeatedly said the May revision is the start of negotiations, and LAO recommended lawmakers avoid using the deadline to rush through major policy changes that are not necessary to balancing the budget.