By Tim Hunt
Passing out gifts in SacramentoUploaded: Jan 13, 2022
California is awash in tax revenues for the second year in a row.
That positions Gov. Gavin Newsom and the Legislature to continue to wear their Santa hats and pass out presents. It should be noted that the gusher is coming mainly from personal income tax and that's driven by wealthy people. Should the economy dip, then those revenues go with it.
Newsom’s budget proposal, which totals more than $213 billion for the general fund, is based on a $45.7 billion surplus. It marks the second year in a row that the surplus has soared and this time it’s not dependent on federal Covid dollars. The huge number has the governor proposing to spend $16 billion of the surplus on kindergarten through community college education as mandated by the voter-passed Proposition 98. That will amount to a record of nearly $21,000 per student from all funding sources.
The governor proposes allocating $20.6 billion of the surplus into the general fund with another $9 billion toward reserves and supplementary pensions. It also includes $34.6 billion in reserve funds.
What’s missing in these proposals is tackling the huge problem with unfunded liabilities in both the state teachers and state public employees’ retirement funds. Those funds have been using unrealistic estimates of total returns and have little more than two-thirds of the assets necessary to pay obligations to retired employees. Contributions from employees and agencies have been increasing and threaten to reduce services in agencies that are fiscally fragile. Putting a chunk of the surplus into those funds would be a wise investment that would help agencies across the state.
Instead, the governor is moving ahead with universal preschool, free school lunches, climate change initiatives and extending health care benefits to all illegal immigrants. Prior budgets have extended coverage to illegal senior citizens and to young people up to the age of 26. Newsom’s budget proposes extending it to every illegal immigrant, an estimated 1.1 million.
It is remarkable how Democrats ignore the fact that these people have broken the law by entering the country illegally. Now, instead of paying a consequence, they are valued for their workforce contribution and added to the Medi-Cal system. That’s problematic given how poorly the state compensates physicians for treating Medi-Cal patients and how few doctors will accept patients.
The governor’s budget proposal also allocates $1 billion to continue to try to solve the homeless problem that’s particularly prevalent in San Francisco and Los Angeles, but encampments can be found in many cities, including here in the Tri-Valley. While driving into Concord on Sunday, we saw many tents pitched underneath BART tracks. There’s no question that it is a vexing challenge and one that government has failed miserably to deal with effectively. Consider that San Francisco’s socially distanced tent spaces in United Nations plaza cost $60,000 each to provide services.
It also prioritizes climate change, continuing to throw money at the perceived issue without any measure of what real success would look like—particularly since China and India to say nothing of African countries as they develop are the major sources of greenhouse gases. Aggressively tackling wildfire through forest management—something Newsom nibbles around the edges on—would have greater payoffs both in public health and healthy forests.
Given the two-thirds supermajorities that Democrats hold in both houses of the Legislature, this budget will boil down to how many new entitlement programs that are ongoing get established versus smart one-time expenditures to tackle key issues.