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Press Release

FOR IMMEDIATE RELEASE

Contact: Brooke Armour [mailto:[email protected]]

916.553.4093

QUICK TAKE: Business Roundtable Responds to Governor’s January Budget Proposal

(SACRAMENTO)—Today, Governor Gavin Newsom announced his January Budget proposal and solutions to balance ongoing and increased investments with a $22.5 billion shortfall.

“For the first time, this governor and Legislature are managing a budget process that reflect deficits rather than surpluses. Now, we face a period of major revenue uncertainty as the primary driver of our job growth and taxes – the high-wage tech sector in Silicon Valley – is going through a downturn. In addition, personal income taxes, corporation taxes, and retail sales are all down as well. We support the governor in his continued investment of one-time revenue in one-time costs,” said Rob Lapsley, president of the California Business Roundtable.

“In addition, last week the Legislative Analyst issued his report [[link removed]] reflecting the unprecedented increases in revenue $132 billion from 2011 to 2022. This report reinforces the governor’s approach to manage the current budget more efficiently and with greater accountability without calling for new major tax increases. The last thing Californians can afford is more taxes, taxes disguised as penalties, or increases in fees which will only further increase the cost of living and doing business. We look forward to working with the governor and Legislature as the state’s fiscal picture becomes clearer in May to ensure California families and businesses do not pay for the state’s budget deficit,” Mr. Lapsley concluded.

INVESTING IN CRITICAL PRIORITIES

The governor’s budget proposal includes ongoing and new funding to address the state’s out-of-control homelessness crisis.Fentanyl is a humanitarian crisis that affects families and businesses alike. We support increased funding to address this crisis head-on.The governor continues to commit critical dollars to infrastructure. We stand committed to support investments that will create a resilient goods movement economy.The governor rightly acknowledges that the state’s fiscal outlook is unpredictable and is right to be conservative in his January Budget while the short and long-term impacts of the economic slowdown, especially in the tech sector, have not been fully realized.

INCREASING COSTS FOR THE BUSINESS COMMUNITY AND FAMILIES

While the governor’s budget appears to not increase taxes, there are several proposals that will increase the cost of living and doing business in the state.The governor’s oil windfall profits tax proposal will increase costs not just for drivers, but for groceries, diapers, and other essentials.The governor is proposing to reduce debt payments to the state’s Unemployment Insurance Fund, creating an even more significant cost burden for all businesses. This lack of funding amounts to the largest tax increase on California businesses in state history and may permanently destabilize the fund.Special fund revenue is paid for by businesses and consumers through myriad taxes, fees, and other charges. In the past, “loans” from these special funds have never been repaid by the state, but rather have been backfilled by additional costs on businesses and consumers.

UNDERSTANDING REVENUE VOLATILITY AND NEED FOR FLEXIBILITY

The governor rightly recognizes the volatile structure of our progressive tax structure. In fact, only 13,000 taxpayers account for over a quarter of the state’s personal income tax revenue.High-wage tech jobs, which sustained the budget during the COVID recession, have been disproportionately impacted by the current economic slow-down.The governor’s budget rightly relies on telework to reduce costs. We have long advocated for the same flexibility in the private sector [[link removed]] the state now gives to public employees, which will help allow lower-income Californians and small businesses take advantage of this cost-saving option.

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California Business Roundtable

1301 I Street, Sacramento, CA 95814

916.553.4093

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