It has widely been reported that the state will likely have a $25 billion budget deficit in 2023, which could possibly increase to $40 billion if a recession is triggered. Somewhat surprising after the state reported a budget surplus of $97.5 billion just this past year. That’s a $122.5 billion swing in less than a year.
The size of these numbers is hard to fathom. Especially for those of us who balance our budget weekly, monthly to make ends meet. And, it begs the question, what is going on with our leadership in Sacramento? Is the recent “The California Blueprint” announced by Gov. Gavin Newsom, a blueprint to failure?
In my research, I found numerous articles examining the problem from the lens of making the budget numbers work, as if we were trying to solve a math equation. While others refer to the problem as “manageable.” But there was no discussion as to why the world’s fifth largest economy can’t seem to manage its budget effectively and deliver the services its residents require? Surely, if any of us in our jobs delivered this type of budget crisis, we would be fired.
So, what’s behind our budget crisis — my hypothesis is that it’s a two-sided problem, Sacramento has a planning problem and an accountability problem.
• Planning: California’s primary source of income is taxes. No surprise there, as we are the highest taxed state in the country. And, many will say that it’s justified given all that this beautiful state has to offer. But apparently the state has overly weighed its income projections on the wealthiest segment of the population continuing to pay more. And, again, some may say that there’s nothing wrong with that. Well, there is something wrong with that when the wealthiest segment is declining due to the impact of inflation, downturn in the tech industry, and many just feeling frustrated and leaving the state.
Please know that I am not making a case (for or against) taxing our wealthy — we can leave that debate for another day. I am calling out the failed strategy of continually building a budget largely based on revenue from a declining segment of the population, while conversely, not having a strategy to grow tax revenue from other facets of the economy, such as encouraging new and existing small and midsize businesses. Creating a climate that encourages innovation and new ideas. And lifting up those in low income or poverty levels to be active members of our economy.
• Accountability: As the numbers above illustrate, we spend a lot of money. Putting aside “the what” we spend our money on, where is the accountability in delivering results? Decades of well-intended social programs and lofty infrastructure programs have delivered little. We clearly have an accountability issue in which every program funded should have a clear timeline of when it will be completed and/or what results will it achieve. Unfortunately, we have created an environment where these “well-intended” programs and the consultants and politicians that sponsor them have become a cottage industry in and of themselves, receiving funding year after year with negligible results.
As a native Californian who has paid taxes for more than 44 years, I have a simple test of whether my tax dollars are having a positive impact:
• Do people feel safe? Unfortunately, no. Of the state’s 58 counties, 37 have seen a rise in violent crimes, with 10 counties increasing by 20% or more.
• Are our schools getting better? No. We rank 44th in the nation (remember the lottery was supposed to address this).
• Is our infrastructure better? No. As evidenced by our ongoing water crisis that has plagued this state for decades. There have been no investments in water infrastructure for more than 40 years; but yet, the state’s population has increased 17% over the same period.
• And, has the homelessness crisis improved? No. California has the third highest rate in the nation, trailing New York and Hawaii, with 38.3 homeless people for every 10,000 residents. Further just over 71% of the homeless in California are unsheltered. That’s both tragic and very sad.
Clearly, we can do better and clearly, we deserve better. And if we want this beautiful state to sustain itself, we must do better.
Daniel Torunian is a native Californian, retired technology executive, start-up adviser, charity leader, and concerned and active citizen.
Excellent article Dan! I worked in the Federal Government for over 20 years. My primary function was budgeting. One day it was feast, next day it was famine, and next day it was feast again and nothing had changed. One thing government does, probably by design, is make everything complicated, making it difficult to unpack. Just think what government would be like if it was understandable and easy to follow.
The Federal government solves its financial problems by increasing the debt ceiling and printing more money. So far, we cannot do that.
The lottery proceeds did not increase funding for the schools. It was offset with reduced funding from the earmarked general fund. Californians were fooled again. It is probably all Trump's fault anyway, the convenient scapegoat.
Well written, Mr. Torunian. But for us to do better, we need a change in leadership that does plan and is accountable. Until then, voters get the government they deserve, or the government that is foisted upon them. Or they’ll leave the state for greener (as in money in their pocket) climates. Perhaps you should run for office to make our state better…
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