Newsom’s spending more, saving less

The General Fund budget provided by Guv Newsom is $222 billion.  But the real budget, the amount spent by the State of California, is north of $400 billion—the difference is money that passes through the State, controlled by the State, but not in the General Fund budget.

“It’s a rather subtle change because the economy continues to hum along and on paper, Newsom’s 2020-21 budget looks to be a picture of fiscal health.

However, the Legislature’s budget analyst, Gabriel Petek, and his staff spotted the change and in a new analysis they lay out the danger of spending virtually every dollar of projected revenue and making only minimal increases in reserves.

A moderate recession could cut revenues by about $25 billion a year for three years, but the state, under Newsom’s proposed budget, would have scarcely $20 billion in reserves to cushion its impact.

That would be sufficient to cover a $47 billion revenue shortfall, Petek estimates, but only if state spending on K-12 schools and community colleges is also reduced to the minimum required by the state constitution. His office had earlier assumed that reserves could be built to $23 billion if much of the state’s revenue gains were saved, rather than spent on new and expanded programs.”

Watch the budget debate n the legislature.  The Newsom budget includes taking over heath care—single payer.  Taking over drug distribution, killing off small pharmacies.  It includes the ability to have government banks kill off private banks, like Bank of America.  Adding is the effort to harass businesses who use gig economy workers, kill off the energy industry (oil) in California.  This Soviet style budget is a disaster—it will cause more productive people to flee the State—either because they lost their job, the State killed their job or they are unable to afford to live in the State.

Newsom’s spending more, saving less

Dan Walters,  CalMatters,  2/17/20   

When Jerry Brown returned to the governorship in 2011, he faced what he called a “wall of debt” from years of severe economic recession and deficit-riddled state budgets.

Accordingly, he made paying off that debt, more than $30 billion, and armoring the budget against future recessions his top priority. Brown persuaded voters to approve what was supposed to be a temporary tax increase, mostly higher income taxes on the affluent, and later a “rainy day fund” that would cushion the effects of recession.

Annually, as Brown presented his budgets to the Legislature, he would display charts and graphs to punctuate his dire warnings about the potential impacts of recession and backed them up by insisting on directing extra revenues into reserves.

Brown’s second governorship was blessed by strong economic recovery — the longest in recent history — and the recession he openly feared never occurred. By the time he departed in 2019, state reserve accounts had accumulated more than $18 billion.

During his first year as governor, Gavin Newsom largely hewed to Brown’s cautious approach to state finances. However, his second budget, unveiled last month, deviates from that course in a way that could spell fiscal calamity should the state be hit by the recession that Brown always saw on the horizon.

It’s a rather subtle change because the economy continues to hum along and on paper, Newsom’s 2020-21 budget looks to be a picture of fiscal health.

However, the Legislature’s budget analyst, Gabriel Petek, and his staff spotted the change and in a new analysis they lay out the danger of spending virtually every dollar of projected revenue and making only minimal increases in reserves.

A moderate recession could cut revenues by about $25 billion a year for three years, but the state, under Newsom’s proposed budget, would have scarcely $20 billion in reserves to cushion its impact.

That would be sufficient to cover a $47 billion revenue shortfall, Petek estimates, but only if state spending on K-12 schools and community colleges is also reduced to the minimum required by the state constitution. His office had earlier assumed that reserves could be built to $23 billion if much of the state’s revenue gains were saved, rather than spent on new and expanded programs.

“By proposing a budget with very small operating surpluses,” Petek writes, “the governor eliminates a key tool of recession preparedness. In a still-growing but now mature economic expansion, supplementing the state’s fiscal resilience by preserving a larger operating surplus would be prudent.”

Why the change of fiscal attitude?

About Stephen Frank

Stephen Frank is the publisher and editor of California Political News and Views. He speaks all over California and appears as a guest on several radio shows each week. He has also served as a guest host on radio talk shows. He is a fulltime political consultant.

Comments

  1. Let me get this straight. Newsom’s House of Cards is based upon the economy of the Republican President Trump.

    If there is a recession the Dem’s are so hoping for the State of Kalif. goes into the dumper. And who get hurt? The very class of workers who they pretend to help.

    Something is really wrong. Yet if you ask a Democrat “something has to change” because the unattainable dream of Socialism and gold in every wallet is what they have promised.

    Float the entire ship and forget about income gaps.

    Whew, was that so hard?

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