Governor Newsom’s Proposed 2021–22 Budget

Every January, governors in California are required to propose a budget (“Governor’s Budget”) for the next fiscal year commencing July 1. Governor’s Budgets provide detailed views of state finances but also are a mixture of fiction, facts and Kabuki. The principal fiction takes the form of projected General Fund revenues, about which planners have little idea since ~70 percent are from personal income taxes significantly dependent upon unpredictable capital gains from a tiny number of taxpayers during a 12-month period that doesn’t even start for nearly six months.* Projected expenditures are more factual but only on a cash basis. The Kabuki is that Governor’s Budgets are just political starting points. The budget will be revised in May, after which the Legislature will have until June 15 to pass a final budget that must be enacted by June 30.

The 2021–22 Governor’s Budget released last Friday is noteworthy for highly visible uses of words such as “equitable” and “broad-based” juxtaposed with less visible facts to the contrary. Eg, while highlighting a $14 billion “broad-based recovery package to support businesses, individuals and job creation” that amounts to just $350 per resident and .005% of annual state GDP, the Budget sheds less light on equally large amounts provided every year to small numbers of well-connected people, including $4.9 billion of unnecessary Cadillac insurance subsidies for ~200,000 retired state employees and their families who already have Medicare or are eligible for ACA subsidies** and salaries for 55,000 prison employees projected to rise 12 percent to $5.5 billion despite a 20 percent drop in inmates and 3 percent decrease in staffing.

We don’t know a single Legislator who believes those salaries and subsidies make sense. But they have been afraid to act because, until now, only the recipients of those billions have paid attention. Don’t blame the recipients, who are entitled to press their rights. Blame the rest of us for not pressing ours. For decades, politicians on both sides of the aisle in California have succeeded politically by saying one thing while doing another. We can change that.

David Crane
President, Govern For California
@DavidGCrane

*You can keep up with actual monthly revenue collections at http://www.dof.ca.gov/Forecasting/Economics/Economic_and_Revenue_Updates/.

**While providing these subsidies, the state is also leaving federal ACA dollars on the table and local governments, schools, and transit and other agencies are leaving both federal and state dollars on the table.

Lecturer at Stanford University and president of Govern For California

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