In March 2020, as California mandated shutdowns and stay-at-home orders, we faced dire predictions of California’s economic collapse. COVID-19 business shutdowns would so hammer families and businesses that the state income tax upon which California depends would crater, taking California’s schools and services with it.
A young and inexperienced Gov. Gavin Newsom faced his first big crisis, proposing huge cuts across the board.
“Here we go again,” I thought, recalling all the belt-tightening and cuts from the Great Recession.
Back then, a steady-handed Jerry Brown got us through that nasty mess – but most will agree that Newsom isn’t Jerry Brown, nor does he have Brown’s respected pragmatism and fiscal discipline. Things indeed looked rocky…
But the COVID-19 recession turned out to be an unusually odd kind of economic disruption. More a reallocation of wealth than a wipe-out. Somehow wealthier Californian taxpayers and businesses thrived, and incomes soared.
Fully unexpected, California has a $76 billion surplus plus an additional $27 billion to be added to the pile from the American Recovery Act. Yes, “fiscally irresponsible” California is admirably sitting atop a $100 billion surprise gold mine, likely the strongest situation in the nation – and predictably, Gov. Newsom is keen on spending the whole of it.
And, what a better time for a money-for-everyone spending spree – during a recall election!
Heaven knows, there’s plenty to fix in California. Still, us of advancing age recognize fiscal prudence is always prudent, and everyone knows what goes around comes around in California’s finances. A $76 billion surplus this year might just as easily turn into a $76 billion shortfall during the next recession. Saving absolutely as much as possible for our next rainy day would seem a first priority. Instead, Newsom got out his money gun and he’s holding the trigger down…
To be fair, $26 billion is statutorily directed toward education. Indeed, Newsom calls for big investments in early childhood education, massive investments in K-12, and nearly $10 billion spread around our Cal States and UC systems.
Most can get behind this investment, as our colleges and universities are key drivers in the state and are estimated to generate $8 in business activity annually for every dollar invested. Smart move, here.
And $11 billion is earmarked for our “rainy day” fund. Helpful – but this could be far greater so as to steel us up for future unknowns.
Then, there’s the billions and hundreds of millions for a specialty projects gift list Santa would envy. More stimulus checks. Business give-backs. Dozens of greater and lesser initiatives with long permanent cost tails, including free Medi-Cal for all undocumented aliens over 60 years old – with a strong chance that documentation requirements will be fully removed for all Medi-Cal recipients. Why non-citizens would get “free stuff” that taxpaying Californians have to pay for is mind-bending. In a state where our top tax rates are 13.3%, and where most families face 7-10% tax… just “giving stuff away” because we can, is fiscal abuse against taxpayers.
California faces many challenges, but a short few are the truly urgent, existential priorities. These should be addressed first, with overwhelming force. Fix these, and California is golden. Fail, and California’s luster will further fade, perhaps forever.
Homelessness. Once and for all, pull out all stops and get this done. Get every last person off the street. Parks are for recreation. Sidewalks are for walking. Streets are for driving. People live in homes, not tents. We must solve this problem, as today, some 170,000 are homeless in this state.
Fire prevention. Our climate has changed. All of us old timers know this as experienced fact. We’ve got to upgrade our power grid. We’ve got to install preventative measures and invest heavily in firefighting gear and systems.
Water supplies. It’s time to act on the Delta and time to build durable and capable water systems sufficient to withstand earthquakes and the hotter California we’re living in.
Tax rates. We’re happy to pay income taxes in California, but frankly, “the rent is too damn high.” A $75 billion surplus means we’re taxing too heavily. Taxes are causing folks to move. It’s time to roll back income and sales tax, restoring excess tax dollars to the people currently overpaying.
California is super fortunate to have fiscally thrived through COVID-19. Newsom is right when he says we have a “generational opportunity.” Let’s not blow it.
Let’s not blow the money and let’s not blow the opportunity. Beyond educational investment, let’s finally fix these four basics plaguing our state.
Fix the big stuff with our big windfall, and make our state sustainable, fire-resistant, safe, clean, healthy – and more affordable for those paying these bills.
Gary Horton’s “Full Speed to Port!” has appeared in The Signal since 2006. The opinions expressed in his column do not necessarily reflect the opinions of The Signal or its editorial board.