Legislature’s GOP leadership calls for fiscal reform

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While Democratic lawmakers recently committed to continuing social programs despite reports of an anticipated $25 billion deficit, GOP lawmakers decried the spending priorities set by the supermajority on the other side of the aisle. 

On Thursday, a prominent Republican in the state Senate likened the Democrats’ seeming willingness to dip into rainy day reserves to the governor “kicking the can down the road,” as minority party leadership in both houses issued calls to “right the ship” due to pending revenue concerns.  

The Legislative Analyst’s Office independent assessment of the state’s budget picture for 2023-24 forecast a deficit of $24 billion on Nov. 16, which it revised a week later to be $25 billion, according to the LAO’s website

“The budget problem is mainly attributable to lower revenue estimates, which are lower than budget act projections from 2021-22 through 2023-24 by $41 billion,” according to the report. 

Phil Ting, D-San Francisco, chair of the Assembly’s Budget Committee, noted in a recent CalMatters report the state has a much better cash situation than in 2008-09, the last time the state’s budget picture was as bleak. 

However, state Sen. Scott Wilk, R-Santa Clarita, said that the state’s “over-reliance” on income tax and, specifically, the capital gains tax — which account for about 10% to 12% of the state’s revenue, he said — is the problem. This makes the situation a bit too volatile to make any predictions on how bleak the outlook is until the April tax deadline and then the subsequent May budget revise. 

“This (situation) really cries out for reform, but it’s just so controversial that it’s not going to happen,” Wilk said Thursday in a phone interview. “The market’s been tanking and if it continues to tank, we’re going to a very serious deficit. And if for some reason (the market improves), that could very quickly close the gap.” 

He noted that the rainy day reserves — which he credited to past negotiations between Gov. Jerry Brown and Republicans in the Legislature over the objections of Democrats — would make for a “softer landing” in a crisis, which is why it’s important to keep that money in place as much as possible. 

“We’re not really going to know anything until Jan. 10 (when Gov. Gavin Newsom is expected to release his budget plan), but my guess is … he’s going to try to kick the can down the road, meaning he’s going to access the rainy day fund, there’s not going to be any new spending and then he, along with everybody else, is going to pray for economic recovery, so we don’t have to make cuts in the next fiscal year,” Wilk said. 

In a November statement announcing his role in the next legislative session as chair of the GOP caucus, Sen. Brian Jones, R-San Diego, pointed out the state’s wasteful spending is responsible for the current outlook. 

“The state has spent $14 billion in the last two years on homelessness, yet California has the highest homeless population in the nation,” he wrote. “Our state has swaths of areas where children, families and veterans are living homeless on our streets. 

“The state spends billions on a ‘White Elephant’ called high-speed rail, yet California has the worst roads in the nation. We can all name dozens of highways and freeways throughout the state that are long overdue for maintenance, upgrades, and expansion.” 

In response to the LAO’s report that noted the “revenue estimates represent the weakest performance the state has experienced since ‘The Great Recession,’” Assembly Republican leader James Gallagher of Yuba City said this was something that should have been anticipated. 

Assembly Republicans have been warning that Democratic policies and spending would trigger inflation and recession. Now that has come to pass. It’s time we right the ship,” Gallagher wrote in a statement last month. “We overtaxed Californians and grew government while ignoring investments in critical infrastructure like new water storage. The LAO report has some good recommendations to get us started on a better path. It’s not too late to focus our spending on the fundamental priorities, save for the rainy day to come, and pursue policies that will grow the economy and lower everyday costs for Californians.” 

The LAO report notes that a recession could increase the anticipated $25 billion shortfall by anywhere from $30 billion to $50 billion.  

“Early in 2023, we suggest the Legislature question the administration about the implementation and distribution of these augmentations,” according to the report, referring to $36 billion allocated for “one-time or temporary purposes.” 

“Early in 2023, we suggest the Legislature question the administration about the implementation and distribution of these augmentations,” according to the report. “If augmentations have not yet been distributed, the Legislature has an opportunity to reevaluate those expenditures.”  

Assembly GOP Chair Tom Lackey, R-Lancaster, who also represents a portion of the SCV, was not immediately available for comment Thursday.  A spokesman for Assemblywoman Pilar Schiavo, D-Porter Ranch, did not immediately respond to a request for comment Thursday.

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