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The Budget Surplus In California Is $6.1 Billion

The Budget Surplus In California Is $6.1 Billion

By Ryan Velez

Jerry Brown became governor of California with the goal of shaking off the budget deficits his predecessors left for the state. He has done a good job of this, with the state projecting a $6.1 billion surplus for the next fiscal year, which begins July 1. The Wall Street Journal reflects on Brown’s tenure as it gets closer to ending.

As is his custom, the governor warned of an inevitable economic slowdown.

“California has faced 10 recessions since World War II, and we must prepare for the 11th,” he said. “Let’s not blow it now.” He proposed stashing the money away in a rainy-day fund whose creation he pushed for in 2014. Nearly 70% of the state’s projected revenue of about $135 billion next fiscal year is derived from personal income taxes, according to the governor’s office.

Thinking about the fiscal health of California is a good idea, as it grapples with a record amount of natural disasters, housing shortages and changes to federal tax regulations. In his 2018 spending plan, Brown calls for $131.7 billion of general fund spending. Including special funds and bonds, which are pools of restricted money that can only be used for specific projects, the total proposed spending next fiscal year is $190.3 billion.

Many in Brown’s party, which wields the power to raise taxes with two-thirds majorities in both state houses, have pushed for increased spending on social programs as the state has recovered from the last recession. Republicans are calling for him to try and return some of that money to taxpayers, who they say are overtaxed.

Assemblyman Vince Fong, a Republican from Kern County and a former staffer of House Majority Leader Kevin McCarthy, said the forecast windfall was evidence that a gasoline tax increase passed by Democrats last year was unnecessary.

“We do not have a revenue problem, we have a spending problem,” Mr. Fong said. “Taxpayers work hard for their income—we should work just as hard to protect it.” There’s also the question of going against federal policy moving forward to lessen the impact of the Republican tax overhaul, which is seen by some as an unfair move against blue states.

State Senate leader Kevin de León introduced legislation last week that would allow California taxpayers to donate to a fund and deduct 100% of the donation, essentially turning state tax payments into a deductible charitable contribution. Other Democratic-controlled states, like New Jersey, are mulling similar tactics.

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