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By Jon Coupal
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.
To read the entire column, please click here.
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