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California Dems Fight Brown Over Tax Windfall


The fight among state Democrats over what to do with California’s surplus is getting heated. Just three years after facing a $60 billion deficit, something between $1.2 and $4.4 billion in extra cash is projected to come California’s way. Governor Jerry Brown is determined to avoid the financial disaster that followed California’s last surplus by sticking the money into a rainy-day fund. But as the NYT reports, some Democrats are equally determined to start spending the surplus on social services:

Vanessa Aramayo, the director of California Partnership, a group of organizations pushing for social service spending, said Mr. Brown was deliberately understating the state’s financial health.

“The governor is attempting to leave a legacy of solving our state budget crisis,” she said. “But he’s doing so on the backs of poor people in the state.” […]

“The only way the governor can possibly come up with his numbers is if you assume the worst on every single variable,” [Assemblyman Bob Blumenfield] said. “That’s just not going to happen.”

“We’ve made some brutal cuts,” Mr. Blumenfield said. “There’s a lot of pain that’s been spread across California, and we can’t ignore that. But we have to be smart. We have finally clawed our way to stability, and we’re not going to squander it.”

The desire to reverse the recessionary spending cuts is understandable, but we’re glad to see that the governor’s biggest priority right now is essentially buying insurance for California’s next economic crisis. And as the Times notes, it’s not clear whether this surplus, the first in a decade, is a sign of a true turnaround or one-time surfeit money that will be gone by next year. Despite its blue state ideology, California is a radically unequal state economically speaking that depends on big tax payments from rich people to float the boat. Last year the rich folks were cashing in stocks to avoid higher capital gains taxes voted by Congress, and California reaped a windfall. Better to hold on to this money until the financial future of the state is clear.

States like Connecticut, Utah, and Wisconsin are also expecting budget surpluses this year, and as America’s economy recovers, it’s natural that surpluses will appear. But not every state with extra money faces the same choices.

To once again become the great state it’s meant to be, California essentially needs to focus on three things. First, California has to find a way to reduce obstacles to business formation and growth by cutting regulations and restructuring government so that government moves faster and costs less. Second, it needs to reduce the general tax level. And third, California desperately needs to build a financial reserve fund so that the next recession doesn’t hit as hard as the one it is now climbing out of.

Whether Jerry Brown is the man to do it all remains to be seen, but his conduct here is a good sign that he understands the third problem, at the very least.

[Governor Jerry Brown image courtesy of Wikimedia Commons]

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  • Pug

    Jerry has the ability to be a real tightwad. That’s good.
    California should work on restoring its higher education system, though. It was a huge factor in making the state great.

  • jeburke

    I don’t think it’s possible to have an honest discussion of these issues with anyone who maintains that Californians suffered from “brutal cuts.” This sort of rhetoric hides the truth and does violence to the language. California’s state spending is considerably higher than it was at the start of the recession, and the new budget projection is higher than this year’s or last year’s budget. This is true whether one looks at the state’s general fund outlays, the total of general spending and capital outlays from bonded debt, or the grand total of actual expenditures combining state funds and all forms of federal assistance.

    In fact, that grand total has risen by more than a whopping 15% in the latest budget vs. expenditures in the 07-08 or 08-09 fiscal years.

    To be sure, there was a temporary reduction in state outlays, but that gap was more than filled by huge increases in federal aid, due primarily to the 2009 stimulus program. Whatever one thinks of the stimulus, one of its main purposes was to support state spending levels, prevent layoffs of public employees, etc. and it succeeded!

    If California actually cut anything it could not actually do without nicely, I’d be very surprised.

  • Corlyss

    My take on the Dem dominance in Ca. government is a little different. History shows that when Dems have all the levers of power, they FUBAR everything they get their law-making hands on. They overreach something awful. And almost immediately the voters realize their mistake and try to correct it. It’s only a matter of time before the Dems hang themselves with all that rope.

  • 24AheadDotCom

    Of course, not a single mention of the major factor that helped cause the problem in the first place or the realistic things CA could do to reverse that major factor.

    I’m not going to mention what that major factor is, but it’s something that’s given more power to the far-left, helped drive the middle class out of CA, helped increase spending, and helped decrease revenue among other things.

    Do any “The American Interest” readers know what that is, and do any know why Walter Russell Mead didn’t mention it?

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