While state lawmakers cut jobs and slash services to balance the budget, they are working to increase spending on one program that would give people who buy a new home a significant tax credit.
Despite a struggling real estate market, sales are booming at a new home project in Fremont.
Builder Mark Robson attributes the boost in sales to California's $10,000 tax credit for new home buyers.
"The tax credit's been great, it's had a significant impact on sales. Buyers have come in and taken advantage of it," said Robson.
But last week, The Franchise Tax Board stopped accepting applications for the credit, after receiving more than 12,000 in just four months.
"The California Tax Credit has been very successful. It's actually more successful than we imagined. It was originally supposed to be a one year program, from March of this year to March of next year, but it expired in four months, a $100 million gone in four months," said Cheryl O'Connor, from the Northern California Builders Association.
Now there are two bills pending in Sacramento that would increase the tax credit by $200 million and extend it for a year.
The California tax credit may be good for new home sales, but some critics argue it actually hurts the resale market.
The reason is the credit encourages new home construction, but does nothing to address the glut of existing inventory, especially foreclosures.
Pat Huffman is the President of the East Bay Association of Realtors. She doesn't worry about new home sales cutting into the resale business.
"My thought is that anything the government does to promote home ownership is good for our communities and right now we don't have a lot of new construction. So I really don't see that happening," said Huffman.
The legislature is expected to vote on extending the new home tax credit later this month.