By Miriam Raftery
November 19, 2018 (Sacramento) -- When Gavin Newsom is sworn is as California’s Governor in January, he’ll be starting out on a strong footing. The state has nearly $30 billion in combined reserved and unexpected tax revenues, the Legislative Analyst’s office just reported, stating, “By historical standards, this surplus is extraordinary.”
So even though Newsom also starts his reign with a two-thirds supermajority of Democrats in both the Assembly and Senate, capable of raising taxes without a single Republican vote, it’s unlikely that they will do so, Cal Matters reports.
Credit for the extraordinary surplus is due mainly to outgoing Governor Jerry Brown, who started his tenure eight years ago facing a $27 billion budget deficit – so bad that some experts feared the state might not stay solvent.
Brown was blocked by Republicans from efforts to increase taxes to balance the budget. So Brown then got approval from voters through ballot measures to raise income taxes mainly on people earning $1 million a year or more. Those revenues now account for over $100 billion projected in the coming fiscal year – that’s 71 percent of the revenue flowing into the state’s general fund to finance programs ranging from schools to healthcare.
While revenues have risen, spending has leveled off for several reasons. Schools have experienced declining enrollment as the state’s population ages. With property values rising, property tax revenues have doubled in the past eight years. Health care costs, though still rising, are forecast to increase at only half the rate as last year since Brown’s successful push to enroll poor people in Medi-Cal means the vast majority of eligible recipients are already signed up.
Brown also wielded his veto power judiciously, sometimes frustrating liberal legislators by vetoing spending bills for various proposals.
Despite the optimistic outlook, budget experts recall the dot.com crash back in 2000, which caused anticipated revenues to plummet, taking the state from a $10 billion surplus to a $12 billion deficit in just one year. The state also faces formidable costs of fighting wildfires and aiding in disaster recovery.
Some legislators have voiced eagerness to push for popular programs to help more Californians, from an ambitious universal healthcare program to public ownership of utilities. California has long led the nation on areas such as combatting climate change and environmental protection.
But while sweeping reforms may have broad appeal, Newsom may be wise to use caution, keeping most of that $30 billion surplus built up since the last recessionand saving it for the proverbial rainy day.