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Gavin Newsom takes the reins as California's newly-elected governor on Monday, but some are already worried about the cost of his 'list of promises'

Key Points
  • California Gov.-elect Gavin Newsom is set to take office Monday with an ambitious and potentially costly agenda that has raised concerns from taxpayer groups.
  • The Democrat, who takes the reins of the state at a time when it has a large surplus, campaigned for government-funded health care and increased investment in education.
California Democratic gubernatorial candidate Gavin Newsom hugs his wife Jennifer as he celebrates being elected governor of the state during an election night party in Los Angeles, California, November 6, 2018.
Mike Blake | Reuters

Democratic California Gov. Gavin Newsom is set to take office on Monday with an ambitious — and potentially costly —agenda that has raised concerns from some taxpayer groups. 

Newsom, who will replace longtime Gov. Jerry Brown, will take over the nation's most populous state when it is enjoying a large surplus. He also will have a Democratic-led supermajority in both houses of the state Legislature, meaning they will have the power to pass new taxes or overrule a governor's veto.

However, Newsom campaigned on a laundry list of costly policy items that include expanded health care, more education funding, and big plans for solving the state's housing and homeless crisis.

"If you look at the list of promises he has made — including universal preschool, a guarantee of free community college, universal health care and single-payer healthcare — we're talking tens of billions, if not hundreds of billions of dollars of promises," said Jon Coupal, president of the Howard Jarvis Taxpayers Association, the state's largest taxpayer group.

"During Gov. Brown's administration, his office seemed to be the brake, if you will, or the deterrent against the more radical elements within the California Legislature," Coupal added. "We don't see that moving forward, and so we are very concerned."

Newsom, currently the state's lieutenant governor, declined comment to CNBC. He is scheduled to take the oath of office as California's governor on Monday, and is required under the state constitution to present a new state budget by Jan. 10.

California's recent annual budget was a $201.4 billion plan signed into law last June by Brown, a Democrat who has expressed the need for fiscal restraint. Brown is departing the governorship as California is forecast to have about $14 billion in the state's rainy day fund, and several billions in surplus.

"The outgoing governor has already intimated that we are likely moving toward a recession," said Sherry Bebitch Jeffe, a longtime political analyst and retired professor of public-policy communication at the University of Southern California. "So there might be a risk involved in addressing a heavy spending agenda."

Trump tension

Jeffe said tensions between the President Donald Trump and Newsom are something to watch, since the federal government is such an important source of funding for California for health care and other programs.

Indeed, nearly $106 billion in federal funds are expected to flow to California in the current fiscal year, with some of it eventually flowing to local recipients, including school districts and counties.

US President Donald Trump (C) looks on with Governor of California Jerry Brown (R) and Lieutenant Governor of California, Gavin Newsom, as they view damage from wildfires in Paradise, California on November 17, 2018.
Saul Loeb | AFP | Getty Images

Trump and Newsom have traded insults on occasion, and the president has previously threatened to take federal money away from California for so-called "sanctuary" policies protecting undocumented immigrants as well as over wildfires the president blames on "poor" forest management.

Newsom takes the reins of California — the fifth largest economy in the world — at a time when the state is suing the Trump administration over a variety of issues, from immigration and health care to energy and the environment. At last count, there were at least 44 lawsuits lodged so far against the administration, according to a report in the Sacramento Bee.

'Just a first start'

During the gubernatorial campaign, Newsom advocated more funding on early childhood programs, including universal preschool and expanded prenatal care. He wants more emphasis on developmental screenings, including more money for home visits, to low-income expectant parents and health care screenings for youngsters.

Overall, the early childhood programs are expected to cost nearly $2 billion and be included in Newsom's first budget, the Los Angeles Times reported Wednesday. About $750 million of the spending will be dedicated to expanding kindergarten education to a full day, and there's also additional money for a focus on training of child-care workers.

"He's putting this as a priority in the budget but it's clearly just a first start," said Ted Lempert, president of Children Now, a national research and advocacy organization based in Oakland.

Lempert, a former Democratic state Assembly member, said several states that are already "way ahead of California in universal preschool funding, including some with Republican governors like Oklahoma. What's exciting about California is there really hasn't been this comprehensive approach from another state."

Newsom also wants to open college savings accounts for every incoming kindergarten student, as well as guaranteeing two years of free community college tuition to every Californian.

"Education cannot be about picking winners and losers," Newsom said during the campaign. "It's about giving every child the opportunity to succeed."

'Cradle-to-career' programs

When discussing education and childcare issues, the 51-year-old incoming governor has frequently called attention to his own personal challenges growing up having dyslexia. He indicated that experience shaped his views on key policies and the need for investing in "cradle-to-career" education programs.

Meantime, Newsom also has discussed implementing a single-payer health care system in California, which is opposed by hospital and doctor groups. While mayor of San Francisco, Newsom signed into law a universal health care program that covered everyone, including noncitizens.

A legislative analysis back in 2017 estimated a single-payer system in California would cost $400 billion annually. Another hurdle to overcome is federal government approval for a major change given a large chunk of the money for the state's health care comes from Washington.

"The vision of a single-payer system, or Medicare for All type system, is basically to have it all financed through a single program like a Medicare program for everybody," said Anthony Wright, executive director of Health Access California, a Sacramento-based statewide health care advocacy group.

A single-payer system would end up being "cheaper than the way we currently finance and structure our health care," Wright told CNBC. He added that the state could still reach universal health care that wouldn't cost $400 billion but instead "be in the single digit billion dollars to basically expand existing programs and affordability assistance to cover the remaining uninsured."

Homeless, affordable housing

A homeless man sits by the waterfront with the San Francisco Bay Bridge in the background in San Francisco, California.
Getty Images

Elsewhere, Newsom also has pledged to focus more resources on the addressing the homeless crisis. California has about one quarter of the nation's homeless population, or about 134,000 people.

Newsom has promised to name a cabinet-level secretary to oversee an inter-agency council on homelessness. While in San Francisco, Newsom championed "Care Not Cash," an initiative designed to curb homelessness in the city by slashing welfare payments to homeless people and instead favoring housing and other social services.

One of the ways Newsom could address the homeless issue statewide is to put more pressure on local governments to build low-income housing, and target more programs to homeless people. California has a housing affordability problem that is especially acute in major cities.

"Utah is the only state producing less housing," Newsom said in during a debate in October with his gubernatorial challenger, Republican businessman John Cox.

After winning the election in November against Cox, Newsom visited a facility in San Francisco for the needy, and called the state's homeless situation "unacceptable" and "our collective responsibility."