“Wisdom and prudence should be the order of the day.” With this extremely rational phrase, Governor Jerry Brown concluded his letter to the California State Legislature regarding his proposed 2014-2015 state budget. The spring season means many things to many people, but to California’s political and public policy “wonks,” it means the state budget process. Stifle those yawns, because our $106.8 billion general fund budget says a lot about who we are as a state and where we’re going—or not going. After optimistically claiming that “California is poised to take advantage of the recovering economy,” the Governor issued words of caution to the Democrat-controlled legislature:
“Given the vagaries of the business cycle, and particularly the volatility of capital gains income, we must be ever vigilant in the commitment of public funds. In addition, past budgetary borrowing, unfunded retirement obligations, bond costs, and deferred maintenance have created a mountain of long-term liabilities that totals hundreds of billions of dollars. In the face of such liabilities, our current budget surplus is rather modest.” In other words, things are looking up, but let’s not get too excited!
After years of budget shortfalls, this year’s proposed budget certainly has some bright spots, including an additional $2.4 billion in projected revenue, but taxpayers and voters should be ever-vigilant in asking whether our representatives are in fact being wise and prudent with our money. According to the Governor’s budget summary, this budget seeks to avoid the “boom-and-bust cycle” of years past. Among the Governor’s proposed spending is: $11 billion toward the state’s $25 billion “Wall of Debt;” $10 billion in new spending for K through 12 schools; $2.9 billion to the UC and CSU systems to keep their tuitions from rising; $1.6 billion for the “rainy day” fund for future tough times; and over $800 million for deferred maintenance for state parks, highways, schools, colleges, courts, prisons, and hospitals.
In the Governor’s “State of the State” address, he spoke proudly of “California’s comeback,” including a million new jobs since 2010. The Governor said that “Californians have a lot to be proud of,” and he thanked the state’s voters for passing Proposition 25 in 2010, which established a majority vote for passage of the state budget, and Proposition 30 in 2012, which temporarily increases taxes.
Brown tempered his enthusiasm with references to the state’s enormous and ever-growing long-term liabilities: over $100 billion in pensions for state workers, teachers, and judges; $65 billion for infrastructure needs; and tens of billions for retiree health care. Brown even referred to the Biblical Book of Genesis and the advice that Joseph gave to Pharaoh—“Put away your surplus during the years of plenty so you will be ready for the lean years, which are sure to follow.” And Brown added some more recent wisdom from American philosopher George Santayana, who famously said, “Those who cannot remember the past are condemned to repeat it.” In this regard, let us not forget that the state was issuing I.O.U.s as recently as 2010.
The Governor had plenty of praise and pride for the Bay Area, listing San Francisco, Oakland, and San Jose as among America’s top-performing metropolitan areas in biotechnology, and UCSF, Berkeley, and Stanford as among the world’s leading academic bioscience institutions. Governor Brown concluded his address by promising to “build for the future, not steal from it.”
While Governor Brown surely was able to speak of positive fiscal developments of late, we must not forget that our state’s taxes, unemployment, and poverty rates remain high, our educational and prison systems are in need of reform, our infrastructure is in need of repair, and much work remains to be done to get our house in order in nearly every arena. As we enjoy what is sure to be a beautiful Bay Area spring and await the “May Revise” (the revised budget with more accurate revenue and expenditure projections for the coming budget cycle), one can only hope that the legislature and Governor heed these words and, in fact, make wisdom and prudence the order of the day.
Brad Hertz is an attorney and partner at The Sutton Law Firm, which specializes in political and election law in the Bay Area and throughout the state.