mead cohen berger shevtsova garfinkle michta grygiel blankenhorn
Derailing California’s Newly Balanced Budget

California has only just recently clawed its way into a budget surplus, but the state government is already planning to move ahead with two of its most expensive planned projects. The New York Times reports:

Emboldened by a brighter fiscal horizon, Gov. Jerry Brown on Thursday recommitted himself to two ambitious projects, a high-speed rail line and a huge water tunnel system, in an optimistic State of the State speech that sought to secure California’s long-term future as well as the three-term governor’s legacy.

The new surplus is vulnerable, and to keep it going Governor Brown and the state legislature need to proceed carefully. A significant percentage of California’s tax revenue comes from the top 1 percent of earners, many of whom are in the tech and entertainment industries.  The state’s fiscal health, then, depends on the boom and bust cycles that beset those industries. Revenues may also be depleted as other businesses flee the state’s newly raised taxes and set up shop elsewhere.

At a combined $100 billion cost, the high-speed rail and water-tunnel projects may dash any hope of maintaining the surplus and resuscitating this economically crippled state. Governor Brown is right to mark this fiscal milestone. But now it’s time to spend wisely, put some revenue aside for a rainy day, and keep the surplus for as long as it will hold.

Features Icon
© The American Interest LLC 2005-2016 About Us Masthead Submissions Advertise Customer Service