A Surplus of Nonsense in the Governor’s Latest Budget
There are two big days for a California governor, January 10 when the budget is presented and the May Revise when a few months of additional data and debate have passed. They’re both political documents, allowing governors to play with numbers. Few governors have been as sporting in that enterprise as Gavin Newsom.
Last week, Newsom announced the state has produced what the Associated Press dutifully called “a record-smashing surplus of nearly $100 billion.” The governor himself called it “simply without precedent.”
“No other state in American history has ever experienced a surplus as large as this,” Newsom said.
But the facts suggest there is no actual “surplus.” California’s most recent balance sheet shows the state’s unrestricted net deficit is $208 billion. While this is better than the dismal straits in which Illinois and New Jersey find themselves, the governor provides no serious budget proposal to address this upside-down status.
California is upside-down because of massive liabilities resulting from employee pensions and lifetime medical benefits. This debt, costing taxpayers some seven percent (or $11 billion) in interest per year must be addressed with aggressively larger annual payments. But with only one measly gesture, you won’t find those enhanced payments anywhere in Newsom’s budgets.
Gov. Newsom will leave office in four years without having made a material dent in the deficit. Now it’s a little late for him to pursue a disciplined approach that most taxpayers follow for their personal retirement savings efforts.
The governor has been disingenuous about the stock market’s role in producing his good fortune. And he is doing nothing to use that good fortune to pay his bills. Instead of putting just $23.3 billion in a rainy day fund, he should deposit something far larger in a restricted state treasurer’s bank account. Then, when the inevitable recession hits and the market bottoms, he should transfer the entire amount to the California Public Employees’ Retirement System (CalPERS) and the retiree medical trust. This way he avoids losing principal and reduces the annual required contribution to both debts after the deposit is made.
Yes, it’s market timing. But talk is cheap, and failing to address serious and growing debts is irresponsible.
Our friends on the left delight in referencing our Native American forebears’ philosophy of planning for seven generations to come. But in the real world, nothing burns so fast through Gavin Newsom’s pockets as a phony surplus. He has not focused on future generations. Debt reduction? Not happening. Reservoirs and roads are unbuilt. The only future Newsom is thinking about is his own. And you’ll realize this six years from now, when it’s too late. I do not envy the men and women who will be left to clean up his mess, or the millions of Californians whose lives will be significantly damaged by his incompetence. The approach will be predictable. Taxes will be increased. The plot never changes. And you can thank Newsom for nothing in the years ahead.
Former state Senator John Moorlach served as Orange County’s treasurer and as a county supervisor. He is a California Policy Center senior fellow.