Please ensure Javascript is enabled for purposes of website accessibility
California Budget Still a Quagmire Despite One-Party Rule at Capitol
By admin
Published 11 months ago on
May 16, 2023

Share

Getting your Trinity Audio player ready...

Drafting state budgets in California was once a fairly straightforward exercise in fiscal politics.

The governor’s budget gnomes could fairly accurately predict how much tax revenue would be generated over the forthcoming fiscal year, particularly since most of it would come from taxes on retail sales, a stable base.

Dan Walters with a serious expression

Dan Walters

CalMatters

Opinion

An initial budget was issued in January and it would be revised in May after the April 15 deadline for personal income taxes provided more specificity. Legislative leaders of both parties huddled, sometimes with the governor, and a final budget emerged.

Yes, there were some conflicts. Budgets took two-thirds votes of both legislative houses so the final product needed bipartisan support. Republicans, usually in the minority, would sometimes withhold votes until their demands were met.

Over time, however, the budget process became a political quagmire, in part because the ideological divisions in the Capitol became more pronounced. As Democrats drifted to the left and Republicans to the right, what once was collegial sparring became holy war. But that was not the only factor.

As California’s array of services expanded, so did the number of budget stakeholders seeking larger pieces of the pie or protecting what they had. The field of play became immensely larger after voters passed Proposition 13, the iconic property tax limit, in 1978 and the state became the basic financier of schools and a big factor in local government budgets.

The pie itself changed. The importance of sales taxes in the revenue stream gave way to dominance by personal income taxes, which are inherently less predictable, particularly since most are paid by relatively few taxpayers in upper income tiers.

‘Extreme Budget Volatility’

As Gov. Gavin Newsom’s latest budget proposal, unveiled last week, notes, “California’s progressive tax system, where nearly half of all personal income tax in the state is paid by the top 1% of earners, has contributed to extreme budget volatility over the years.”

That volatility is the chief reason for the budget’s projection of a $31.5 billion deficit just 12 months after Newsom declared that the state had a $97 billion surplus and bragged that “No other state in American history has ever experienced a surplus as large as this.”

Not only have revenues become structurally less predictable, but they also have become subject to changes in national and global economies.

The revised budget’s deficit is projected even without a recession, but were there an even modest downturn – which many economists expect, due to the Federal Reserve System’s sharp hikes in interest rates to battle inflation – the state would take a big hit.

“Based on a moderate recession scenario in fiscal year 2023-24, revenues could decrease by $40 billion in 2023-24 alone, largely driven by losses in personal income tax,” the budget declares. “Revenue declines relative to the May Revision forecast could reach an additional $100 billion through 2026-27.”

Revenue declines of those magnitudes would quickly consume the state’s seemingly hefty “rainy day” reserves.

Budgets no longer require two-thirds legislative votes and Democrats have overwhelming legislative majorities, but that, ironically, is another complicating factor.

Periodic revenue surges, such as last year’s $97 billion paper surplus, whet appetites of Democrats’ allies, such as unions and social welfare and medical care advocates, for additional spending and generate resistance when times get tough.

Newsom’s budget would put the brakes on spending, including clawing back some appropriations from last year. Advocacy groups are leaning on friendly legislators to do whatever is necessary to keep the money flowing, including tax increases and/or tapping into the reserves.

One-party control of the Capitol may change the specifics of fiscal politics, but doesn’t make them any simpler.

About the Author

Dan Walters has been a journalist for nearly 60 years, spending all but a few of those years working for California newspapers. He began his professional career in 1960, at age 16, at the Humboldt Times. For more columns by Walters, go to calmatters.org/commentary.

Make Your Voice Heard

GV Wire encourages vigorous debate from people and organizations on local, state, and national issues. Submit your op-ed to rreed@gvwire.com for consideration. 

 

RELATED TOPICS:

DON'T MISS

Tent Compound Rises in Southern Gaza as Israel Prepares for Rafah Offensive

DON'T MISS

Costa Seeks Legislation to Prevent Reedley Lab Repeat

DON'T MISS

Fresno Home Care Workers Threaten Civil Disobedience Over Low Pay

DON'T MISS

Sacramento Bee Accused of Mangling the Facts About Fish Caught in Pumps

DON'T MISS

Legacy of Speed: The 1,600 Horsepower 1957 ‘Skeva’ Chevy Bel Air Built in Fresno

DON'T MISS

KMJ’s Gabriel & Musson Win Radio Honors, Fresno Council Plaudits

DON'T MISS

Tabloid Publisher Says He Pledged to Be Trump Campaign’s ‘Eyes and Ears’ During 2016 Race

DON'T MISS

General Motors Reports Strong First-Quarter Profits as Prices Help Offset Small US Sales Dip

DON'T MISS

Caitlin Clark Is Set to Sign a New Nike Deal Valued at $28 Million Over 8 Years, Reports Say

DON'T MISS

Fresno’s Baklava House Entices Foodies With Its Delicious Flavors

UP NEXT

Newsom Criticizes Local Response to Homelessness. He Should Look in the Mirror.

UP NEXT

CA Lawmakers Reject Bill Cracking Down on Utilities Spending Customers’ Money

UP NEXT

Work Starts on Bullet Train Line From Las Vegas to LA

UP NEXT

Will CA Lawmakers Crack Down on Spending by Utility Companies?

UP NEXT

Los Angeles Mayor Karen Bass Safe After Suspect Breaks Into Official Residence, Police Say

UP NEXT

Newsom Wants to Make It Easier for Arizona Women to Get a California Abortion

UP NEXT

By Remembering the Genocide, We Can Help Rebuild Armenia

UP NEXT

15 People Injured When Tram Collides With Guardrail at Universal Studios Theme Park

UP NEXT

Californians Worry About Crime, Setting up a Ballot Measure Showdown

UP NEXT

California Leaders Take Sides in Monumental Supreme Court Case on Homelessness

Sacramento Bee Accused of Mangling the Facts About Fish Caught in Pumps

16 hours ago

Legacy of Speed: The 1,600 Horsepower 1957 ‘Skeva’ Chevy Bel Air Built in Fresno

17 hours ago

KMJ’s Gabriel & Musson Win Radio Honors, Fresno Council Plaudits

17 hours ago

Tabloid Publisher Says He Pledged to Be Trump Campaign’s ‘Eyes and Ears’ During 2016 Race

19 hours ago

General Motors Reports Strong First-Quarter Profits as Prices Help Offset Small US Sales Dip

19 hours ago

Caitlin Clark Is Set to Sign a New Nike Deal Valued at $28 Million Over 8 Years, Reports Say

19 hours ago

Fresno’s Baklava House Entices Foodies With Its Delicious Flavors

20 hours ago

A Far-Right German EU Lawmaker’s Aide Is Arrested on Suspicion of Spying for China

20 hours ago

Wall Street Rallies and Adds to Its Hot Start to the Week

20 hours ago

The Icon Returns: Discover the All-New 2024 Land Cruiser

20 hours ago

Tent Compound Rises in Southern Gaza as Israel Prepares for Rafah Offensive

Satellite photos analyzed by The Associated Press appear to show a new compound of tents being built near Khan Younis in the southern Gaza S...

14 hours ago

14 hours ago

Tent Compound Rises in Southern Gaza as Israel Prepares for Rafah Offensive

14 hours ago

Costa Seeks Legislation to Prevent Reedley Lab Repeat

16 hours ago

Fresno Home Care Workers Threaten Civil Disobedience Over Low Pay

16 hours ago

Sacramento Bee Accused of Mangling the Facts About Fish Caught in Pumps

17 hours ago

Legacy of Speed: The 1,600 Horsepower 1957 ‘Skeva’ Chevy Bel Air Built in Fresno

17 hours ago

KMJ’s Gabriel & Musson Win Radio Honors, Fresno Council Plaudits

19 hours ago

Tabloid Publisher Says He Pledged to Be Trump Campaign’s ‘Eyes and Ears’ During 2016 Race

19 hours ago

General Motors Reports Strong First-Quarter Profits as Prices Help Offset Small US Sales Dip

MENU

CONNECT WITH US

Search

Send this to a friend