Newsom’s rushed, bloated budget

We can say this much about the folks in the California Legislative Analyst’s Office: They don’t mince words. After Gov. Gavin Newsom crowed last week about “his” $76 billion surplus, the LAO was standing by with a bucket of cold water to dump on his latest proposed budget.

The Legislative Analyst’s Office is the state legislature’s nonpartisan fiscal and policy advisor, and they had plenty of advice.

First, the LAO states that Newsom’s $76 billion figure is about double what the surplus actually is: “We estimate the state has $38 billion in discretionary state funds to allocate in the 2021 22 budget process, an estimate that is different than the governor’s figure.” The LAO attributes the difference to the fact that most of the $76 billion must be spent on specific purposes including schools and community colleges, reserves, and debt payments. Spending which is constitutionally mandated cannot be considered “surplus.”

Second, the Gann Spending Limit, a constitutional provision requiring surplus funds to be returned to taxpayers, complicates the governor’s plan to provide direct payments to only some of California’s residents. A way to avoid the problem would be to return money directly to taxpayers by reducing taxes, something the LAO has acknowledged is a viable alternative.

Here again, the LAO pushes back against the governor’s assumptions: “The Governor’s May Revision estimates the state will collect $16 billion in revenues in excess of the [Gann] limit this year. However, the ultimate amount of a potential excess will depend on decisions by the Legislature. Ultimately while the [Gann limit] will be an important consideration in this year’s budget process, the Legislature has substantial discretion in how to meet the constitutional requirements.”

Third, and perhaps the most offensive to the taxpaying public, is the governor’s intention to continue drawing down the state’s reserve funds. This makes no sense when we have a multi-billion dollars surplus. The LAO expressly states that such a plan is imprudent: “Despite a historic surge in revenues, the Governor continues to rely on budget tools from last year. Specifically, he uses $12 billion in reserve withdrawals and borrowing to increase spending… We urge the Legislature not to take a step back from its track record of prudent budget management.”

Fourth, the LAO criticizes the plan for its smorgasbord of new program proposals: “The May Revision includes roughly 400 new proposals. While the surplus is large enough to make significant inroads in addressing a few key policy priorities, it is unlikely sufficient to do so across the number of issues contemplated in the May Revision.”

Fifth, the LAO suggests that the governor, for whatever reason, is moving too fast on too many fronts: “Departments’ capacity to allocate this funding in a timely and effective manner likely will be significantly constrained. More importantly, the Legislature’s time to deliberate over choices made in this budget is extremely limited. We recommend the Legislature delay some of those decisions and offer options for doing so.”

In essence, the LAO is asking Gov. Newsom, what’s your hurry? We suspect that the truthful answer to that question is that the governor is under the political pressure of the pending recall election.

The Legislature is constitutionally mandated to pass the budget by June 15th. Taxpayers should demand that our elected leadership exercise prudence and restraint in fulfilling their obligations and reject the excesses and errors in the governor’s proposal. Adopting the recommendations of the LAO would be a good place to start.

Jon Coupal is president of the Howard Jarvis Taxpayers Association.