Does Record State Budget Mask Deeper Threats?

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It’s hard not feel good when there’s a blizzard of cash raining down on you. But it can also mask serious issues, much like a good one-time dumping of rain and snow can lead to dangerous complacency about a statewide water system that is woefully unprepared to deal with the severe, growing and longer-term effects of drought. The record budget proposal Gov. Newsom unveiled this week came with no shortage of money. The $286 billion spending plan marks a 210 percent increase over the state’s 2012 budget, and it spreads the money around in such a way as to make almost everyone happy.

More money for housing and homelessness. More money for transportation and other critical infrastructure. More money for schools and higher education. More money for childcare and families. More money for healthcare and COVID response. More money for various business tax relief and incentive programs. Even fiscal hawks couldn’t argue (too much) with the many billions set aside in the state’s rainy day accounts and other reserves and used to pay down looming public pension debt. Although, they (like us) would take umbrage with the inadequate $3 billion directed to paying back California’s $20 billion in federal unemployment insurance loans, a fiscal burden that effectively represents a massive tax increase on thousands of small businesses and other employers.

It’s a testament to California’s economic might and resilience that we can all be proud of. At the same time, we can’t forget that even as the budget has more than tripled over the past 10 years the state’s housing and homelessness crises remain as bad as ever and have even gotten worse, drought and wildfires continue to grow in duration and severity, and increasing numbers of workers and employers are pulling up stakes for less expensive states. We can’t forget that in that time economic inequity has only widened. We can’t forget that California last year recorded its first population decline in recorded history and that our remaining population is aging. We can’t forget that we have some of the highest taxes and energy costs in the country. And we can’t forget that we continue to place outsized and unsustainable reliance on high-income earners who also have the greatest ability to leave.

We’re all for a healthy state budget. And while spending money is loads of fun, the Bay Area Council remains committed to making the harder structural and legislative reforms that are critical for California’s economic competitiveness and ensuring that all Californians enjoy the benefits of our economic success. That’s something money can’t buy.

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