Discipline needed

While we are facing a $68 billion deficit just a fiscal year after enjoying a $100 billion surplus, Wednesday’s budget proposal by Gov. Gavin Newsom is actually estimating a $38 billion deficit. That should actually be correct since the state relies so much on capital gains taxes from the stock market, which saw a big boom last year after languishing the year prior. So it’s not really a bust, but rather a mini-bust. For now.

Part of the blame was placed on the New Year’s storms of last year, which prompted late tax payments. Budget planners should have also known revenue was going to be down through measuring other factors.

And thank goodness for Proposition 2, passed by voters in 2014, which required the state to have a rainy day fund filled with 1.5% of general fund revenue every year, though I wish it were more. While we’re thanking goodness, let’s also show our gratitude for Proposition 98, passed by voters in 1988, which required the state to set minimum funding for schools of about 40% of the overall budget. Though the governor is taking some money from schools savings, the overall impact is not that great. That’s key since schools haven’t recovered from the funding losses of the Great Recession and COVID money is running out. Any significant cuts could put our entire educational system into a spiral of distress.

Still, there has to be additional cuts and the governor is proposing it come from climate change programs and housing, which is sure to cause some squawking since that is near and dear to many, and critical to our overall economic and societal success. Cuts to programs to help the homeless through supportive housing and mental health assistance are the most difficult to absorb since they are the most needed, and time should be spent in the next few months to find ways to fund them like the governor did with transportation needs.

While cuts hurt, these are relatively modest and could actually be seen as healthy since austerity is often thrown out the window when the booms take place. I’ve always felt it strange that many legislators don’t take much interest in the budget outside of funding for their bills since it’s the most important thing the state decides. It would be worthwhile to spend some time contemplating ways to lower spending and raise revenue, though I don’t support a new wealth tax for high-income earners.

A couple of pie-in-the-sky ideas: Find a way to get rid of the Gann limit through another state proposition. Launched in 1979 through Proposition 4, it caps state spending and requires refunds to taxpayers and for education. That’s all good, but it’s better to put money away for when it’s needed. A state ballot measure that requires the money over the Gann limit go toward education and budget stabilization with refunds for those making under a certain amount would likely be successful.

Proposition 2 requires a minimum amount for a rainy day fund but it has a limit of 10% of the overall budget. Another state ballot measure to increase that amount should be pursued, particularly since the amount currently in it doesn’t even cover a moderate estimated deficit.

People have talked about getting rid of Proposition 13 since it was passed in 1978, but it’s never going to happen with a straight repeal though there was an unsuccessful push to adjust it for commercial buildings. The only way to do it would be grandfather in every property owner today and adjust over a generation. But there doesn’t seem to be any will for that.

I’d be remiss if I didn’t mention a program being unfairly maligned. That is providing full Medi-Cal access to undocumented immigrants. While there is a cost, it actually saves the state money since preventative care is cheaper than emergency care and counties already provide this health care. Plus, it’s humane. Until there is federal immigration reform, it just makes sense.

Yet, there is a point here about the value of our state’s spending. Nearly every program has its supporters and, when times are good, it’s easy to satiate them. But part of the job of our state officials is to be good stewards of our money, and that takes discipline.

Jon Mays is the editor-in-chief of the Daily Journal. He can be reached at jon@smdailyjournal.com. Follow Jon on X @jonmays.