Governor Newsom First Budget Proposal: Modest Investments in California Small Businesses

“Governor Gavin Newsom’s 2023-24 budget proposal includes a scale-back of investments in small and micro-businesses, a sharp contrast to previous years’ budgets where critical provisions to help small businesses stay afloat were prioritized. 

As small businesses continue to navigate challenges on their road to recovery, we encourage Governor Newsom and the California State Legislature to enact forward-thinking policies that will deliver essential resources to the small business community and promote inclusive small business growth. 

Many provisions included in this year’s proposal would support long-term recovery efforts for California’s smaller firms. We applaud proposed investments in relaunching the ‘Made in California Program’ that will elevate manufacturing in our state and promote local businesses. Additionally, small business owners are encouraged by the following proposed investments: 

• Support for the State Small Business Credit Initiative (SSBCI) for small business lenders. The proposal includes $18 billion of capital, in addition to the $1.1 billion received from the federal American Rescue Plan Act of 2021, to incentivize small business lending.
• Healthcare For All. The proposal maintains funding to expand full-scope MediCal eligibility to all income-eligible Californians, regardless of immigration status. This will drastically decrease the number of remaining uninsured in the state, as undocumented Californians make up the largest group of the state's uninsured, many of whom own or work for small businesses. 
• Meaningful investments in childcare. Childcare impacts the small business ecosystem in a multitude of ways. Championing quality and affordable childcare boosts entrepreneurship and sustains practical solutions to overcoming childcare challenges for small business employees. We are glad that the proposed budget maintains annual investments to expand subsidized childcare slot availability and support necessary and long overdue rate reforms.   

Despite these helpful proposed investments, the budget missed several opportunities to build on the progress made over previous budget cycles that supports the small business ecosystem. For example, Small Business Majority research has found that small businesses that rent or own their business space have faced a looming rent crisis. We were disappointed that the proposed budget did not provide commercial rent relief for small business owners and small landlords. Furthermore, we urge the governor to provide full investments in the following: 

• Healthcare Affordability Reserve Fund (HCARF). The proposed budget pulls over $330 million from HCARF and transfers those dollars to the general fund. Instead of limiting this Fund, California should utilize it to create affordability programs operated by Covered California. Pursuing greater healthcare affordability for small businesses and individual coverage, like extending premium assistance and containing costs, eliminates unnecessary barriers to entry for vulnerable and disadvantaged small business owners to invest in their businesses.
• IBank’s Small Business Finance Center and the California Rebuilding Fund. The proposed budget removes $50 million from IBank’s Small Business Finance Center and the California Rebuilding Fund that should go towards financial assistance for small businesses. I-Bank lending programs are proven to leverage federal dollars to help small businesses unable to access traditional capital expand their enterprises. This fund is key to long-term recovery.
• Unemployment benefits for undocumented workers. Regardless of immigration status, unemployment benefits are a lifeline to out-of-work Californians who use these dollars to purchase essential goods and services from small businesses.

Despite an estimated budget shortfall, we are hopeful that changes to the governor’s next proposed budget will continue to build on the innovative policies and investments of previous budget cycles. We are encouraged by some proposals included, but more is needed to support the state’s entrepreneurs, small employers and their employees. We urge the governor to invest in lending, healthcare, and continue to work with childcare provider organizations in the ongoing improvement of childcare programs that are critical to the success of California’s small business ecosystem.”  

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