Gavin Newsom wants California to be its own nation-state in the Trump era

Gavin newsomJust five weeks into the job, Gov. Gavin Newsom has crystallized his vision of what California will look like in the Trump era: It won’t just be the hub of the resistance against the president; it will be its own nation-state.

But before Newsom can create a country-within-a-country, he had to defuse two multibillion-dollar grenades that his predecessor, Gov. Jerry Brown, left in his in-box: high-speed rail and the delta tunnels project. In proposing Tuesday to scale back both of Brown’s unpopular legacy projects, Newsom hopes he can preserve enough political capital to get his own legacy projects on the fast track.

If he can do that, he can lead California down its own path for as long as Trump is president. California must go it alone, because Trump’s portrait of America is “fundamentally at odds with California values,” the governor said Tuesday in his first State of the State speech. …

Click here to read the full article from the San Francisco Chronicle

How Much Should We Pay Our Public Sector Workers?

Pension moneyPublic employee compensation issues are never far from the headlines in California, but both 2019 and 2020 appear likely to continue the recent trend of increasingly contentious negotiations and the accompanying highly charged public debate.

At the local level, in recent months we have already seen teacher strike authorization votes in the major urban school districts of Oakland, Los Angeles, and Sacramento, among other localities.

At the state level, the election of Gov. Gavin Newsom raises the question of whether the Governor’s Office will continue former Gov. Brown’s precedent of requiring state level bargaining units to accept new paycheck deductions to help pay for the cost of retiree medical care.

Newsom has already signaled that he will uphold the “California rule,” which prohibits any reduction of existing public employees’ pensions even if it causes the insolvency, and or ultimate bankruptcy of the public agency in question.

Five bargaining units representing about 46,000 state workers have contacts expiring in July 2019, and the contract for SEIU Local 1000, the state’s largest union representing about 95,000 employees, expires in January 2020, according to a Sacramento Bee report.

What is not often discussed during this periodic collective bargaining process at both the local and state levels of government in California is whether the state’s system for setting public employee compensation is working or not, and perhaps more importantly, whether this whole system is sustainable given the state’s rapidly escalating public debt levels?

The unfortunate reality is that the state’s whole collective bargaining system, and accompanying laws, was setup decades ago, dating back to Gov. Brown’s first stint as Governor, and has changed little since then.

As recent events have begun to suggest more clearly, this system appears increasingly disconnected from several key principles of good government and effective public sector financial management.

Perhaps most importantly, the compensation of our public sector workers should be linked to what is financially affordable and sustainable for a given public agency.

As reported by Senator John Moorlach, the California Policy Center and others, the mounting debt and looming financial insolvency for the vast majority of public agencies in California suggests that many public agencies in California are struggling to pay their contractual debt obligations, of which the vast majority is related to public employee compensation.

Furthermore, the recent strike-ending deals cut in Oakland and Los Angeles only served to exacerbate the financial weaknesses of the school districts and push existing problems further into the future, particularly with regard to public employee compensation practices.

Another key issue that is almost completely forgotten from the get-go, is how much should we pay public sector employees to begin with?

In the private sector, employee compensation is determined by competition and market forces.  But in the public sector most positions are compensated based on decades of previous negotiations which yields a pay scale, and total compensation package, that is often far in excess of what would be paid for comparable positions in the private sector.

The public sector unions have perfected their rebuttals to these issues, and I have heard an analyzed all of them, but the simple fact remains:  why should California taxpayers compensate public sector workers in excess of the market rate for a given position?

The reality is that it is common for public employees to be compensated far in excess of what they would receive in the private sector for comparable work.  The California Policy Center and others have found this excess compensation to be as high as 100% or more when total compensation is included, particularly benefits.

Nobody disputes the value that our public sector workers provide, but when 20% of the state lives in poverty and many more Californians are living paycheck to paycheck, this is really an issue of fundamental fairness and equity to the average California taxpayer.

One last principle that is rarely discussed in the public sector is the concept of linking compensation to performance.

In the private sector, this principle is of the utmost consideration because every employee has to be paid based on the value that they provide to the company.  Moreover, the linking of pay to performance often provides a great way to incentivize employees to do a better job, thus benefiting both the employee and the company.

In California public sector collective bargaining, public sector employees are routinely awarded a whole host of bonuses, premiums, retroactive pay increases, and raises without any connection to their actual performance or value provided to the government or people of California.

In addition, as most public managers would tell you, it is almost impossible to fire underperforming or poorly performing employees, and they commonly get moved around without the bureaucracy rather than fired just because it is so difficult, almost unheard of.

From a public management perspective, the impact that this disconnect between compensation and performance permeates the whole system of California government—providing significant disincentives to work hard, produce results, and serve the state and its people in the most beneficial manner possible.

As a former financial analyst for public sector collective bargaining, I am not holding my breath for any of these practices to change soon, but at the same time, I acknowledge that change could be on the horizon at some point.

The reality is that public agencies, while more insulated from market factors, must still operate in the same market economy and within some of the same fiduciary, legal and financial parameters that private businesses do.

If a private company, makes poor financial decisions it goes out of business or is reformed and restored to financial viability.

The public sector, on the other hand, does not have the same financial bottom line as private sector businesses and can continue to deteriorate, both financially and in terms of compromised performance, over a significantly longer time horizon.

Public sector agencies, particularly local government agencies, can run out of money and go bankrupt—ultimately leaving many debts unpaid, particularly public employee debt obligations.

Just take a look at Orange County in the 1990s, and the California cities of Vallejo, Stockton, and San Bernardino in the 2000s.

No U.S. state has went bankrupt yet, but some analysts believe the State of Illinois could be close, and there is also the case of the U.S. territory Puerto Rico’s debt crisis.

As the recent unrest in the state’s education system suggests, the road to financial ruin takes time, and is not pretty.

In the end, the people who are the most hurt are the least vulnerable, our teachers and kids in this case–it is just a shame that more of our elected officials and union leaders do not realize this and heed this fact of life before it is too late.

David Kersten is an independent political consultant who lives in the Bay Area. Kersten is also an adjunct professor of public budgeting at the University of San Francisco.

This article was originally published by Fox and Hounds Daily

Latest Pension Ruling Likely To Create Future Uncertainty

CourtFor the second time in two years, the California Supreme Court has released a ruling on a large state issue that analysts say creates new uncertainty going forward.

Last week, the court issued its long-awaited decision in a court case involving a Sacramento local firefighters union that alleged a provision of the 2012 pension reform measure approved by the Legislature and signed by then-Gov. Jerry Brown was illegal under the “California Rule.” That’s the legal concept stemming from a 1955 state Supreme Court ruling that holds the terms of a public employee’s pension benefit cannot be reduced for years not yet worked, only kept the same or increased.

Cal Fire Local 2881 said that the pension reform’s ban on “air time” – the purchase of service credits to enhance pensions – violated the California Rule. But a unanimous state Supreme Court said “air time” was not a comprehensively bargained or legislatively approved vested right.

Yet in the lead opinion, Chief Justice Tani Cantil-Sakauye (pictured) explicitly said she was not taking a position on the California Rule question of whether pension terms could be changed going forward for years not worked.

This mixed message produced media confusion. Some news bulletins declared the justices had approved allowing a rollback of local benefits. Others suggested the California Rule had dodged a bullet.

Was ‘California Rule’ weakened or untouched?

Interest groups were similarly split.

Officials with the League of California Cities saw the court’s willingness to change the terms of pensions on a relatively minor issue as a sign it was open to a significant weakening of the California Rule. The league and many like groups hope for a state Supreme Court ruling that echoes a lower court’s ruling that pensions are not “immutable.” They were heartened by Cantil-Sakauye specifically noting the state had raised the retirement age from 67 to 70 for current as well as prospective employees.

But the Californians for Retirement Security, which represents 1.6 million public employees and former public employees, declared victory after noting that Cantil-Sakauye had specifically said “air time” was changeable because it was not a vested right – unlike basic pension formulas basing retirement checks on years worked times a percent of late-career salary.

The group and others also cited a concurring opinion written by Justice Leondra Kruger and joined by Justice Goodwin Liu that held that government employers could not “withdraw” from the pension terms established upon initial employment by “an implied unilateral contract.”

The state Supreme Court is expected to eventually take up at least two more cases involving union objections to the 2012 pension reform, so the sanctity and extent of the California Rule is likely to remain in the news. In his final year in office, Gov. Jerry Brown repeatedly urged the court to give governments the option to change future pension terms as pension costs have crowded out local, county and school programs and services. Brown’s office defended the 2012 reform law before the high court because of concern that state Attorney General Xavier Becerra was not eager to defend it.

Like 2017 case, ruling seen as murky, not clarifying

But in the meantime, last week’s ruling seems as murky as the court’s decision in the 2017 California Cannabis Coalition v. City of Upland case. Previously, Proposition 218, approved by voters in 1996, had been understood to require that any tax whose revenue would go to a special purpose – building a sports arena, adding libraries, etc. – had to be approved by a two-thirds vote.

Upending decades of precedent, the state Supreme Court held in a 5-2 decision that the two-thirds threshold applied only to ballot measures initiated by local governments. Because they were not local government measures, those qualified by citizen initiatives only needed simple majority support to be enacted.

In dissent, Justice Kruger took square aim at the idea that this interpretation was what voters expected in 1996 when they made it harder for local governments to raise taxes.

Kruger wrote, “A tax passed by voter initiative, no less than a tax passed by vote of the city council, is a tax of the local government, to be collected by the local government, to raise revenue for the local government. None of this could have been lost on the electorate that, also by initiative, amended the California Constitution to set ground rules for voter approval of local taxes.”

This article was originally published by CalWatchdog.com

Don’t Derail the Bullet Train Derailment

Gov. Jerry Brown, Anne GustEven before California’s High Speed Rail bond proposal appeared on the ballot in November 2008, the Howard Jarvis Taxpayers Association commissioned a study in conjunction with the Reason Foundation because of deep concerns about the project’s viability. The study, published in September 2008, just prior to the election, confirmed our worst fears. Specifically, the executive summary of the nearly 200-page document warned:

“The CHSRA plans as currently proposed are likely to have very little relationship to what would eventually be built due to questionable ridership projections and cost assumptions, overly optimistic projections of ridership diversion from other modes of transport, insufficient attention to potential speed restrictions and safety issues and discounting of potential community or political opposition. Further, the system’s environmental benefits have been grossly exaggerated, especially with respect to reduction of greenhouse gas emissions that have been associated with climate change.”

In the ensuing decade, it became increasingly clear that every negative prediction about the project came to be realized. Even initial advocates of the project, including a former chairman of the High Speed Rail Authority, turned against the costly boondoggle.

The capstone of criticism came at the end of 2018 when California’s own state auditor issued a scathing report excoriating the project’s mismanagement, waste and lack of transparency. To understand just how damning the HSR audit was, just consider the subtitle: “Flawed Decision Making and Poor Contract Management Have Contributed to Billions in Cost Overruns and Delays in the System’s Construction.”

To read the entire column, please click here.

Gavin Newsom Cuts Jerry Brown’s Twin Tunnels to One

Delta TunnelsCalifornia Governor Gavin Newsom announced Tuesday in his first “State of the State” address that he would be cutting the California WaterFix, also known as the “Twin Tunnels,” from two tunnels to one.

It was the second major blow to the legacy of his predecessor, Gov. Jerry Brown, after Newsom announced just moments before that he was canceling the California High-Speed Rail Authority’s plans to connect San Francisco and Los Angeles.

The California WaterFix aims to route water from the Sacramento River underneath the California Delta directly to the pumping stations further south that supply water to the state and federal water projects, which in turn bring water to farmers and cities across the dry southern portion of the state. The diversion is intended to reduce risk to endangered fish populations in the Delta and to bring fresher, more reliable water to consumers downstream.

But the cost of the project continued to rise, reaching an estimated $17.1 billion last year, prompting speculation that the twin tunnels might have to be reduced to one. The project also provoked opposition — not just from local communities in the Delta who faced being surrounded by construction for years, but also from some farming and environmental groups who worried the tunnels would not actually reduce the rising salinity of water in the Delta.

Late last year, the entire project was put on hold when the Delta Stewardship Council, a state body that enforces compliance with an environmental management plan for the Delta, threatened to find that the Waterfix violated requirements. The state withdrew its certification for the tunnels, but planned to re-apply.

Then Newsom said Tuesday:

I do not support the Water Fix as currently configured. Meaning, I do not support the twin tunnels. But we can build on the important work that’s already been done. That’s why I do support a single tunnel.

The status quo is not an option.

We need to protect our water supply from earthquakes and rising sea levels, preserve delta fisheries, and meet the needs of cities and farms.

We have to get past the old binaries, like farmers versus environmentalists, or North versus South. Our approach can’t be “either/or.”  It must be “yes/and.”

As the Sacramento Bee noted, Newsom’s decision would save money but also “likely means WaterFix would require a fresh set of environmental reviews before it can proceed, translating into additional delays for a project that’s been in the planning stage for more than a decade and will take an estimated 15 years to build.”

Newsom also announced that he was replacing the chair of the State Water Resources Control Board (SWRCB), Felicia Marcus. Marcus is a former attorney for the Natural Resources Defense Council, and critics charged that she was too partial to environmental interests. Last year, she pushed through the Bay-Delta Plan, which restricts water from the San Joaquin River watershed to farms and cities, and has resulted in a slew of lawsuits. Newsom favored a more consultative approach, and has replaced Marcus with moderate Joaquin Estevel.

In his address, Newsom also pushed for a tax on drinking water to pay for water supply to disadvantaged communities.

The overall effect is to cancel, or cut, Gov. Jerry Brown’s most important legacy projects. Last December, before leaving office, Brown appeared before the Sacramento Press Club and “predicted that California’s high-speed rail project would be built, as would his ‘twin tunnels’ project to bring water from north to south,” Breitbart News reported at the time.

With his first speech to the legislature, Newsom has already undone Brown’s expectations.

Joel B. Pollak is Senior Editor-at-Large at Breitbart News. He is a winner of the 2018 Robert Novak Journalism Alumni Fellowship. He is also the co-author of How Trump Won: The Inside Story of a Revolution, which is available from Regnery. Follow him on Twitter at @joelpollak.

State Threatens Encinitas With Lawsuit Over Housing Policy

Encinitas housingGov. Gavin Newsom’s administration has put another coastal town on notice that it must meet state mandates to add a significant amount of units affordable by low-income families – reflecting the newly elected governor’s view that a lack of housing is one of California’s biggest problems.

In a Feb. 4 letter to the city of Encinitas, state housing official Zachary Olmstead said the city needed to ”amend or invalidate” a 2013 ordinance approved by voters that said developers had to get voters’ blessing if they wanted to increase the density of their projects or make zoning changes. The letter noted that this law and other city actions had the effect of blocking Encinitas from meeting state requirements that it add 1,141 affordable units. The city of 63,000 has few such units now.

While the Encinitas City Council once seemed as strongly anti-growth as the public, state threats under the Jerry Brown administration led the council in 2016 and 2018 to seek voters’ approval of what’s known as a Housing Element plan, failing both times. The plan is a formal document submitted to the state that outlines what projects will be built so that the city meets its commitment to “accommodate the housing needs of Californians of all economic levels.”

Like Huntington Beach, Encinitas could face lawsuit

Encinitas is the only city in San Diego County without a similar state-approved plan. It is among the richest cities in the country. As of the latest Zillow data, the median average home price is $1.05 million, and the latest RentCafe data puts the average monthly rent at $2,056.

While the 2013 city law targeted by the state has already been suspended until 2021 by a Superior Court judge as being pre-empted by state law, that wasn’t viewed as going far enough by state officials. Olmstead’s letter cited the cumulative effect of a “complex set of regulations” that make it impossible for new projects that would help the city comply with state requirements.

If Encinitas officials don’t change course, the letter warned that state grants might be withheld, including for transportation projects funded by the Legislature’s 2017 increase in state vehicle taxes – and that the Newsom administration would ask Attorney General Xavier Becerra to sue the city for defying state law.

In a case involving the same issues, the state and the city of Huntington Beach filed lawsuits against each other last month in Orange County over whether Huntington Beach is breaking state housing laws. Becerra says 2017 legislation passed in Sacramento clearly empowers his office to sue to enforce plainly written state mandates. Huntington Beach City Attorney Michael Gates, however, says as a charter city – one with its own voter-approved de facto constitution – Huntington Beach has the authority to reject some state edicts that infringe on the city’s right to self-govern its “municipal affairs.”

Can charter cities claim exemption from mandates?

A League of California Cities primer on the rights of charter cities offers ammunition for Huntington Beach’s claim. It notes that with “some exceptions,” charter cities control land-use and zoning decisions. But a 1975 Loyola University of Los Angeles Law Review analysis cited by the league said ambiguous language in state law left it unclear precisely when charter city ordinances took precedent on land-use issues.

Encinitas is a general law city not eligible for charter city protections from some types of state interference. But if Encinitas officials proposed and city voters approved a charter city amendment in a special election, Encinitas could become a charter city within months.

Last year, after disputes with the state, officials in Menlo Park in Silicon Valley considered a quick push for charter city status before putting the issue on hold for the time being.

This article was originally published by CalWatchdog.com

Gov. Newsom to Reduce National Guard Presence at Border

California Gov. Gavin Newsom is slated to pull several hundred National Guard troops from the state’s border with Mexico on Monday in an apparent rebuff to President Donald Trump’s characterization of the region being under siege by Central American refugees and migrants, according to reports.

The move comes despite his predecessor’s agreement – along with other past and current border state governors – to send troops to the border at the Trump administration’s request. Former California Gov. Jerry Brown originally approved the mission through the end of March, but qualified that the state’s troops “will not be enforcing federal immigration laws.”

Newsom’s plan will require the National Guard to immediately begin withdrawing troops but still give it until the end of March to do so. According to excerpts from his Tuesday State of the State address, he will call the “border emergency” a “manufactured crisis,” and will say that “California will not be part of this political theater.” …

Click here to read the full article from Fox News

Can California Afford to Provide Universal Health Care Coverage?

Healthcare costsPerhaps no issue looms larger on both the state and national political stage than the question of universal health care coverage.

U.S. Presidential hopeful Kamala Harris (D) sent a shockwave through the national health care debate on Monday Jan. 28th by nonchalantly stating that she would eliminate private insurers as a necessary part of implementing “Medicare-for-all,” according to a CNN report.

Due to a firestorm of attention, most of it negative, the next day the Harris campaign walked back the previous day’s remarks in large part by stating that the candidate would also be open to more moderate health reform plans, which would preserve the private industry, according to the CNN report.

Newly elected California Governor Gavin Newsom (D) campaigned on the issue of single-payer health care and on his very first day in office unveiled a comprehensive package of reform proposals aimed at expanding state health care coverage subsidies and lowering its costs, which includes extending Medi-Cal to undocumented immigrants, according to a report by the LA Times.

In an interview, Gov. Newsom told the LA Times “These are not just symbolic gestures…We’re hoping to ignite a new conversation. It’s a moral imperative, not just economic,” states the LA Time report.

But as many experts, including Gov. Newsom, have pointed out, big systemic reform to the system, such as a move to a single-payer health system, would require the unlikely support of the Trump Administration.

Newsom has done a good job of tempering expectations for single-payer health care and his proposed coverage expansions and prescription cost controls demonstrate to the his supporters and the public that he is serious about expanding coverage as well containing costs.

But the 800-pound guerilla in the universal health care conversation is where will all the money come from to provide guaranteed government financed coverage to every Californian and everyone who likely to come to California once universal health care is guaranteed by the state?

“Where do you get the extra money? This is the whole question…I don’t even get it…how do you do that?,” said former California Governor Jerry Brown (D) following a universal healthcare discussion in Washington, D.C. in a 2017 interview with the LA Times.

At the time, Gov. Brown pointed out that the overall cost of medical care in California is equal to 18% of the state’s gross domestic product, which would be about $450 billion.

“You take a problem and say I’m going to solve it by something that’s an even bigger problem, which makes no sense,” then Governor Brown said at the time, according to the LA Times report.

Gov. Newsom developed some questionable rhetoric during the 2018 campaign, where he said that the State of California cannot afford not to move to a single-payer system because health care has become such a big expense in the state.

It appears that one of the major points of disagreement between former Gov. Brown and now Governor Gavin Newsom is the question of whether the State of California can afford to move to a universal health care system, specifically a single-payer system?

More recently, other high-profile liberal Democrats have come out against single-payer health care with former Mayor of New York City and billionaire Michael Bloomberg stating that Medicare-for-all “would bankrupt us for a very long time,” according to a CNN report.

“I think we could never afford that,” Bloomberg said, addressing pin factory employees in New Hampshire. “We are talking about trillions of dollars.”

“I think you could have Medicare-for-all people who are uncovered, but that’s a smaller group,” Bloomberg said.

“But to replace the entire private system where companies provide health care for their employees would bankrupt us for a very long time,” said Bloomberg according to the CNN report, which noted that Bloomberg made the comments in response to Sen. Kamala Harris calling for an end to the private health care market.

So what does all this mean for the current universal health care debate in California?

It means that California Democrats might want to heed the advice of two of the county’s most prominent liberal Democrats—former Gov. Jerry Brown and Michael Bloomberg—and proceed with great caution regarding the feasibility of California going it alone on universal health care.

There is no question that the state could choose to enact a single-payer or Obamacare-type universal health care system, but the million dollar question, or trillion dollar question rather in this case, is would such a system work and be fiscally sustainable over the long-term?

As a long-time analyst of fiscal issues in California, I believe that former Gov. Jerry Brown and Michael Bloomberg are correct to point out the major challenges and risks of moving to a universal health care system—both at the state level and the federal level.

David Kersten is an independent political consultant who lives in the Bay Area. Kersten is also an adjunct professor of public budgeting at the University of San Francisco.

Stop Letting Sacramento Fool Us

Capitol“Fool me once, shame on you. Fool me twice, shame on me,” so the saying goes. Unfortunately, California voters have been fooled (aka lied to) so many times by our political leaders that perhaps they have come to expect it. For a politician to actually keep his or her word is now the exception, not the rule.

And it’s not just voters who get fooled. Interest groups and other officials are often snookered by those with more political power.  Several recent displays of this political behavior show beyond any doubt that promises made in Sacramento have an extraordinarily short shelf life.

The first example deals with California’s one-of-a-kind “cap and trade” law, a market-based regulatory system for incentivizing reductions in greenhouse gas emissions. Under this program, impacted industries must pay for emitting greenhouse gases by purchasing credits at auction. The program was set to expire in 2020, but in 2017 there was a big political push to extend “cap and trade” in a way that would impose another huge cost to refineries and utilities, which would then pass those costs to California drivers, truckers and electricity customers.

Surprisingly, many industries forced into the “cap-and-trade” auctions supported the extension. They did so because they were threatened by Gov. Jerry Brown, environmental extremists and powerful regulators that if they didn’t, they’d be hit with an alternative program run completely by the government bureaucrats at the California Air Resources Board. Taxpayer groups, small-business interests and most Republicans opposed the extension because it would further raise California’s already sky-high cost of living. In addition to the cost, there was nothing in the political deal that guaranteed CARB wouldn’t move forward with punishing regulations anyway. …

Click here to read the full article from the OC Register

Spending Plans Will Run Up Against Fiscal Reality

Gavin NewsomGavin Newsom was recently inaugurated as California’s 40th governor, taking over a general-fund budget that is flush with cash and a state government that is in remarkably good shape — at least superficially — from a fiscal perspective. For all his flaws, outgoing Gov. Jerry Brown left Newsom with a $15 billion surplus and a rainy day fund that is nearly full. As an added plus, the economy that is humming along even though an erratic stock market points to storm clouds on the horizon.

The big question is whether Newsom will heed Brown’s advice and govern as if there’s always a recession around the corner — or ignore the former governor’s warnings about Democratic lawmakers who always say “yes” to any “harebrained” spending scheme. Unfortunately, based on Newsom’s inaugural words, initial budget and many of his early high-level administrative appointments, the safe money is on the latter. Newsom wants to spend big.

One need not read between the lines in Newsom’s introductory words. He spelled it out clearly. Newsom pointed to Brown’s inaugural address, which quoted from the Sermon on the Mount. There was the foolish man who built a house on sand and the wise man who built it on rock. “For eight years, California has built a foundation of rock,” Newsom said. “Our job now is not to rest on that foundation. It is to build our house upon it.”

So now that the state is on solid financial footing, the new governor envisions a rapid expansion of government social programs. “We will support parents so they can give their kids the love and care they need, especially in those critical early years when so much development occurs,” Newsom said. That speaks to the $1.8 billion in early childhood programs that the new governor is touting. The term “we,” of course, refers to California’s taxpayers.

“We will launch a Marshall Plan for affordable housing and lift up the fight against homelessness from a local matter to a state-wide mission,” he added. The term “Marshall Plan” is not subtle. That was the American financial assistance program to help Western Europe rebuild after the devastation of World War II, at a cost of $100 billion in current dollars.

Continuing the metaphor of California as a home, Newsom added that “In our home, every person should have access to quality, affordable health care.” He has long advocated for some type of universal healthcare coverage (although not necessarily the single-payer system that failed to make it through the Legislature in 2017), and some of his most noteworthy aides have a background in promoting government healthcare programs.

“Everyone in California should have a good job with fair pay,” he said. “Every child should have a great school and a teacher who is supported and respected. Every young person should be able to go to college without crushing debt or to get the training they need to compete and succeed. And every senior should be able to retire with security and live at home with dignity.” Those are vague, feel-good ideas that would garner few objections. But his ideas for implementing them, such as his bidget plan for free community college, will come with a hefty price tag.

There will be plenty of time to dissect the specific policy proposals that will move forward as the legislative session gets under way. For instance, the community college idea is a particularly bad one. California community colleges already are inexpensive. Making the second year of tuition “free” (the first year already is free for first-time California students) will only clog up the classrooms with free riders, thus making it tougher for those students who are serious about getting an education to get classes and improve their job prospects.

However, the main purpose of this article is to provide a warning amid the exuberance of a new gubernatorial administration. Basically, that financial foundation might be built less on rock and more on sand than many of us would like to believe.

There’s no complaining about the size of the budget surplus and rainy day fund, but there’s more to a budget than those items. As a comprehensive new California Policy Center report from Ed Ring and Marc Joffe points out, “We estimate that California’s total state and local government debt as of 6/30/2017 totaled just over $1.5 trillion. That total includes all outstanding bonds, loans, and other long-term liabilities, along with the officially reported unfunded liability for other post-employment benefits (primarily retiree healthcare), as well as unfunded pension liabilities.” That’s a 15-percent increase from two years ago—and a number that equals 54 percent of the gross state product.

The Brown administration had done little to deal with the unfunded liabilities. Its one major pension reform law, the Public Employees’ Pension Reform Act, was exceedingly modest. In the waning days of his administration, Brown’s attorneys argued before the state Supreme Court for changes in the “California Rule,” which restricts the ability of governments to reduce pension benefits going forward. That’s still unresolved and Newsom already has made clear his opposition to changes in pensions—and one of his top aides comes out of the California Labor Federation.

Bottom line: Just because the general-fund budget is in good shape does not mean that California’s overall fiscal picture is all that bright. A responsible new administration would attempt to fix those problems, which are crowding out public services at the local and state level, before engaging in a spending spree that will add to the state burden. Newsom’s early budget hits $209 billion overall and includes a grabbag of new programs, although he does send money to pay off some pension debt and is bolstering the rainy day fund.

The outgoing governor increased taxes early and often. It’s unwise to add new burdens on taxpayers, especially given that economic boom times always are followed by a bust and many Californians continue to flee the state’s high tax burden. Newsom already is proposing new fees on water and 911 service.

California’s most notorious public-policy disasters have come, counter-intuitively, during the best fiscal times, when revenues were swelling and budgets were flush with cash. The best example came in 1999, when Gov. Gray Davis signed a law that caused a pension-hiking frenzy and led directly to the state’s debt crisis. The stock market was riding high and the California Public Employees’ Retirement System (CalPERS) promised that increasing pensions by 50 percent retroactively wouldn’t cost taxpayers a dime because market returns would cover the costs.

It didn’t cost a dime, but cost billions of dollars annually in general-fund payments and added hundreds of billions of dollars in taxpayer-backed liabilities. The biggest danger to California is now a governor who believes that the state is in such great financial shape that he can start spending with wild abandon. He will not be restrained by the Legislature, which now has strong Democratic super-majorities that are itching to spend money. We don’t want to wish for an economic downturn, a stock-market crash or another busted housing bubble, but that appears to be the only hope right now to derail the coming spending train.

This column was first published by the California Policy Center.

Steven Greenhut is Western region director for the R Street Institute. Write to him at sgreenhut@rstreet.org.