Newsom budget: The good, the bad and the ugly

The governor’s budget is a tale of the good, the bad and the ugly. We won’t see a real state budget until it emerges from the smoke-filled backroom following the May revise, but that didn’t stop Gov. Gavin Newsom from gleefully announcing to reporters how he would like to spend the windfall of other people’s money in a 400-page “summary” presented last week.

Here’s the good, the bad and the ugly of his proposal.

The Good.

The governor’s budget puts more money into the reserve accounts, accelerates the paydown of state retirement liabilities, eliminates some budgetary debt, and allocates 86 percent of the discretionary surplus to one-time spending rather than ongoing liabilities that has so often happened in past years.

That’s good because the good times won’t go on forever. While the budget projects healthy returns for the next couple of years, it notes that “[s]tructural (non-pandemic) downside risks to the forecast remain, including the challenges of an aging population, declining migration flows, lower fertility rates, higher housing and living costs, increasing inequality, and stock market volatility.”

That’s important because the top 1% of California taxpayers pay more than 50% of the state’s income tax revenues. The state is currently riding high on the wealthy’s stock market gains, but as the Federal Reserve starts raising interest rates, the party could be coming to an end, and soon.

The Bad.

The bad is that an already bloated bureaucracy is getting even more bloated. Under the requirements of Proposition 98, increases in spending for public schools and community colleges will be dramatic and, as has been much talked about in these pages recently, California’s public schools aren’t hurting for cash as it is.

According to the federal government’s National Center for Education Statistics, in inflation-adjusted constant dollars, per-pupil spending in California for public elementary and secondary schools in 2017-18, the most recent year for which statistics are available, was $13,129, the highest ever.

Under the governor’s budget, schools would see more than $20,000 per student, putting California in the top five of states in education spending – with little to show for it.

Even worse is the fact that there is little in the budget to address waste, fraud and abuse generally, not just in education. There is nothing to prevent another fiasco like we saw with the $20 billion in fraudulent claims paid by the Employment Development Department; still no accountability with the bullet train project and, in fact, the boondoggle is getting billions more.

The Ugly.

Now for the ugly. A couple of weeks ago, this column talked about how part of the anger in 1978 that propelled Proposition 13 to passage was Gov. Jerry Brown’s admission that California was sitting on a massive surplus. Jesse Unruh, California state treasurer at the time, labeled it as “obscene.” Folks losing their homes to high taxes while the state sat on more money than it needed was simply too much for California voters to bear.

Now California’s budget stands at a record-breaking $286.4 billion and includes a $45.7 billion surplus. It’s more than double the surplus that had Californians so angry in 1978.

We wondered aloud how long voters would again stand for the state’s current “obscene” surplus while we lead the nation in poverty and skyrocketing inflation makes it even harder to hang on – just like it did in 1978. The governor’s budget seemingly acknowledges that fact. The budget projects that the Gann Spending Limit, a constitutional provision requiring surplus funds to be returned to taxpayers, will be exceeded in the 2020-21 and 2021-22 fiscal years.

The problem, though, is that through their shell games, the Legislature can avoid returning that money to taxpayers (as they have done for decades), but the question is, what will Californians do about it? Things could get ugly.

Jon Coupal is president of the Howard Jarvis Taxpayers Association.