CA Legislative Budget Steals More From The Future
The California Legislature has issued its proposed budget for the next fiscal year. Details have been provided by the Budget Advisor to the Assembly Speaker, who lays out a frightening future budget landscape:
“California faces future annual deficits projected by both the Department of Finance and the Legislative Analyst’s Office at $10 billion to $20 billion per year through 2028-29, assuming the Legislature adopts ongoing spending reductions at the level the Governor proposed in his May Revision. After 2030, taxes on higher-income Californians--approved by voters in Proposition 30 (2012) and Proposition 55 (2016)—expire, which could add billions more to future deficits.
“Economic experts warn of possible recession, which could further weaken state revenues over the next year or two.
“[The] federal government threatens funding for research institutions that drive the economy and innovation, as well as vital services that support families and communities.”
But despite that precarious future, the Legislature proposes to draw more money from budget reserves that will be needed if that future arises:
“In addition to using [$7.1 billion] from the rainy day fund, the legislative plan expands the use of “internal borrowing” from other state accounts’ reserves, a common practice the state has used in various forms for decades to help balance budgets. The Governor’s May Revision proposal included about $4.0 billion of proposed internal borrowing (excluding Proposition 98 settle up), including a $3.4 billion borrowing related to this year’s Medi-Cal cost overruns. The legislative plan increases that total to about $6.5 billion, including a $1 billion increase in the Medi-Cal borrowing and $1.5 billion more from general state cash balances.”
The Legislature and Governor Newsom already tapped reserves for $4.9 billion in the last budget. Adoption of the proposed Legislative Budget would leave only $13.2 billion in the Special Fund For Economic Uncertainties and Rainy Day Fund, a frighteningly tiny sum in the context of a budget that the Department of Finance has estimated could suffer revenue losses in a recession of “an average of $25 billion per years for two years [and] continue with more years of revenue declines in the range of $15 to $20 billion.”
Perhaps no one serving in the CA Legislature today is aware of the painful cuts required during the last recession in 2009 and 2010 when revenues plummeted and the state lacked adequate reserves. Whether they are or not, it seems that neither the US Congress nor the CA Legislature is willing to stop selling off the future.
Nothing new here. Kalifornia is a train wreck, whose governance is similar to that of a Banana Republic, with only one de facto Party, which spends first and asks questions later.