Please ensure Javascript is enabled for purposes of website accessibility
Landslide, Supermajorities, and Fat Budget Surplus: It's Good to Be Gavin
By admin
Published 6 years ago on
November 19, 2018

Share

The good news just keeps coming for California Gov.-elect Gavin Newsom.

By Dan Morain

CALmatters

Not only did he win a resounding 60 percent-plus landslide, but he will be greeted by a two-thirds supermajority of fellow Democrats in both houses — more than sufficient to approve a tax increase. Not that he’ll need it any time soon.

That’s because he’ll also inherit a $200-billion plus budget that, as it turns out, is in “remarkably good shape” heading into the coming year, with nearly $30 billion in combined reserves and unexpected tax revenue, the Legislative Analyst’s Office reported last week.

“By historical standards, this surplus is extraordinary,” the analyst wrote in its annual fiscal outlook for the 2019-20 budget year.

So is Newsom’s luck, says Hoover Institution research fellow Bill Whalen, who worked in Gov. Pete Wilson’s administration. “This,” Whalen said Wednesday, “is living under a fortunate star.”

One reason for the analyst’s projected surplus is that spending increases will be “very low” for a variety of reasons, not the least of which is that under Gov. Jerry Brown, lawmakers have sought to limit increases in ongoing spending.

Some Experts Doubted That California Could Remain Solvent

Eight years ago, when Brown was governor-elect, California was mired in a recession. The state faced a $27 billion budget deficit. Some experts doubted that California could remain solvent.

Eight years ago, when Brown was governor-elect, California was mired in a recession. The state faced a $27 billion budget deficit. Some experts doubted that California could remain solvent.

In its fiscal outlook in November 2010, the LAO issued offered the stark choice: “Address today’s huge, frustrating budget problems now or defer the state’s budgetary and policy problems to future Californians.”

Brown responded in 2011 by asking the Legislature to approve a sales and income tax increases. Republicans, who still had clout then, blocked his appeal.

Brown then turned to voters who answered by approving a ballot measure raising taxes in 2012. Voters extended that higher income tax rate by initiative again in 2016. By the time Newsom completes his first year in office, revenue from personal income taxes in California will have increased by 46 percent since 2012-13.

Income tax revenue, much of it paid by people earning $1 million or more, will account for $101 billion in the coming year, or 71 percent of the revenue that flows into the general fund. The general fund pays for the state’s share of most programs, including schools, universities, health care, and prisons.

California’s Spending Is Leveling Off

While revenue rises, California’s spending is leveling off for a variety of reasons:

  • Public schools, which are the biggest draw on the state budget, are experiencing declining enrollment as California’s fertility rate continues to fall.
  • Property taxes — the local government’s share of school funding — will generate $25.3 billion. Eight years ago, property tax revenue accounted for $13.2 billion.
  • Health care spending will rise less quickly, about 4 percent in the coming year. That’s significantly less than the 9 percent increase from the prior year.

The analyst notes that spending on Medi-Cal, the main health care program for poor people, is increasing less rapidly in part because California under Brown has succeeded in enrolling about as many people as are eligible.

“I’ll give you the asterisk now,” said Ann Hollingshead, senior fiscal and policy analyst for the LAO who along with Deputy Legislative Analyst Carolyn Chu provided CALmatters with the budget briefing. The surplus includes $14.5 billion that by law must stay in the reserve, plus $14.8 billion in a one-time revenue surge.

That’s the largest projected surplus ever in California. But as a percentage of the budget, it’s second to the projected surplus in 2000. That year, the Legislative Analyst anticipated $10 billion in extra state money. Then the dot-com bust hit. The supposed surplus transformed into a $12 billion deficit.

“We tell that story as a cautionary tale,” Hollingshead said.

A Recession at Some Point Surely Will Hit

In other words, the LAO suggests, Newsom and his supermajority would be wise to sock away the vast majority of the $30 billion windfall for the recession that at some point surely will hit.

“When Jerry Brown came in in 2011 he did a very good job of setting the tone and tenor for the Legislature (by) vetoing the budget.”Bill Whalen, who worked in Gov. Pete Wilson’s administration

Whalen echoes that caution, noting that the Legislature will likely besiege Newsom with spending requests, which he should resist, if only to manage expectations — which will be formidable, given the hand that Newsom wields now. His advice? A fiscal showdown.

“When Jerry Brown came in in 2011 he did a very good job of setting the tone and tenor for the Legislature (by) vetoing the budget,” Whalen said.

“That was a very effective way of saying: You will not push me around.”

Laurel Rosenhall contributed to this report.

CALmatters.org is a nonprofit, nonpartisan media venture explaining California policies and politics.

DON'T MISS

Average Rate on a 30-Year Mortgage in the US Rises to Highest Level Since July

DON'T MISS

Cutting in Line? American Airlines’ New Boarding Tech Might Stop You at Now Over 100 Airports

DON'T MISS

MLB Will Test Robot Umpires at 13 Spring Training Ballparks Hosting 19 Teams

DON'T MISS

Death Toll in Gaza From Israel-Hamas War Passes 44,000, Palestinian Officials Say

DON'T MISS

Jussie Smollett’s Conviction in 2019 Attack on Himself Is Overturned

DON'T MISS

Fresno Council Lowers Speed Limits on Friant and Audubon

DON'T MISS

How About an Honest Conversation About the Range of Light Monument Proposal?

DON'T MISS

UConn Coach Geno Auriemma Breaks NCAA Wins Record With 1,217th Victory

DON'T MISS

Fresno Doctors Will Pay $2.4 Million to Settle Kickback Allegations, DOJ Says

DON'T MISS

Warriors Guard De’Anthony Melton to Undergo Season-Ending Knee Surgery

UP NEXT

Is Fresno Mobile Home Park Controversy Over? Tenants Applaud Federal Judge’s Ruling

UP NEXT

What Will Happen to CNBC and MSNBC When They No Longer Have a Corporate Connection to NBC News?

UP NEXT

Major Storm Drops Record Rain, Downs Trees in Northern California After Devastation Further North

UP NEXT

Newsom Heads to Fresno, a County That Voted for Trump

UP NEXT

Conservative Professors and Students Are Beating CA Community Colleges in Court

UP NEXT

Thousands of University of California Workers Go on 2-Day Strike Over Wages, Staff Shortages

UP NEXT

Former Bitwise Employees Settle for $20 Million: Fresno Attorney

UP NEXT

Gavin Newsom Pledged to Release His Tax Returns Every Year. The Last One Was for 2020.

UP NEXT

California Governor Will Not Make Clemency Decision for Menendez Brothers Until New DA Reviews Case

UP NEXT

Fewer Kids Are Going to California Public Schools. Is There a Right Way to Close Campuses?

Death Toll in Gaza From Israel-Hamas War Passes 44,000, Palestinian Officials Say

1 hour ago

Jussie Smollett’s Conviction in 2019 Attack on Himself Is Overturned

1 hour ago

Fresno Council Lowers Speed Limits on Friant and Audubon

1 hour ago

How About an Honest Conversation About the Range of Light Monument Proposal?

2 hours ago

UConn Coach Geno Auriemma Breaks NCAA Wins Record With 1,217th Victory

3 hours ago

Fresno Doctors Will Pay $2.4 Million to Settle Kickback Allegations, DOJ Says

3 hours ago

Warriors Guard De’Anthony Melton to Undergo Season-Ending Knee Surgery

3 hours ago

Massive Ground Beef Recall Affects Restaurants Nationwide, USDA Warns

3 hours ago

Chris Stapleton Wins 4 CMA Awards, but Morgan Wallen Is Entertainer of the Year

3 hours ago

These Fresno Schools Are Unsafe and in Bad Condition. And No One Is Complaining

3 hours ago

Average Rate on a 30-Year Mortgage in the US Rises to Highest Level Since July

The average rate on a 30-year mortgage in the U.S. edged closer to 7% this week, climbing to its highest level since July. The rate rose to ...

9 minutes ago

9 minutes ago

Average Rate on a 30-Year Mortgage in the US Rises to Highest Level Since July

14 minutes ago

Cutting in Line? American Airlines’ New Boarding Tech Might Stop You at Now Over 100 Airports

34 minutes ago

MLB Will Test Robot Umpires at 13 Spring Training Ballparks Hosting 19 Teams

1 hour ago

Death Toll in Gaza From Israel-Hamas War Passes 44,000, Palestinian Officials Say

1 hour ago

Jussie Smollett’s Conviction in 2019 Attack on Himself Is Overturned

Fresno motorcycle cop enforces the 45 mph speed limit
1 hour ago

Fresno Council Lowers Speed Limits on Friant and Audubon

2 hours ago

How About an Honest Conversation About the Range of Light Monument Proposal?

3 hours ago

UConn Coach Geno Auriemma Breaks NCAA Wins Record With 1,217th Victory

Help continue the work that gets you the news that matters most.

Search

Send this to a friend