The Golden State Attempts to Scrape Together a Budget
[guest post by JVW]
UPDATE: Stupid me; I should have linked the proposed budget document which kinds of lays everything out. Here it is.
We of course have seen this coming ever since the COVID-19 shutdowns began, but now the California Legislature and Governor Newsom are beginning the difficult process of cobbling together a budget for the 2020-21 fiscal year. It involves a wing and a prayer:
How does a liberal, blue-state governor take on the unappealing task of slashing the budget? By shifting a lot of the pressure to the federal government.
In revising California’s budget down to $203 billion today, Gov. Gavin Newsom charted a plan to fill a huge deficit by tying many cuts to additional federal aid. If the feds come through with $1 trillion for state and local governments that Newsom and other Democratic governors have requested, California would not reduce funding to schools, colleges, parks, child care, health care and other programs.
“The President of the United States, with a stroke of the pen, could provide support for Nancy Pelosi’s new Heroes Act and these cuts could be eliminated,” Newsom said, as he presented his proposal to close a $54 billion deficit brought on by record job losses during the coronavirus pandemic.
It’s a strategic, if risky, course as Newsom heads into a sprint of budget negotiations with state lawmakers over the next four weeks.
The state needs to have the federal commitment by July 1 when the new budget goes into effect, but given the partisan division that currently exists in Washington it might be a stretch to expect resolution in six weeks. So the state is exploring a number of scenarios, from the idealized framework of full support coming from Washington down to the disastrous one in which no federal aid is forthcoming. Taking those two as best-case and worst-case, the outline starts to emerge.
In the absolute best-case scenario Congress and the White House would cough up enough money so that the Sacramento gravy trail could continue, but given the reluctance of House Democrats in swing districts to sign on to Aunt Nancy Pelosi’s $3 trillion (yep, that’s trillion with a “t”) plan as well as Cocaine Mitch McConnell’s outright dismissal of progressive fantasies, states are inexorably going to tighten their belts. The hopes of the Democrat establishment in Sacramento are therefore limited to receiving a roughly $14 billion wet kiss from Uncle Sucker to plug budgetary holes. In return, California would:
* rescind approximately $6.1 billion in recent increases, including an expansion of MediCal services to immigrant families and the elderly
* forego a planned $2.4 billion supplementary contribution to public retirement accounts, which won’t sit well with the state actuaries or unions
* transfer $8.8 billion from the state’s rainy day fund, with the possibility of withdrawing an additional $7.5 billion over the following two budget years while we wait for what might be a fairly long recovery
* cap tax credits used by businesses and wealthy taxpayers, including those used for net operating losses, which would allegedly save $4.4 billion, providing those taxpayers don’t flee the state
* shuffle $4.1 billion from account to account and change payment dates, and rig up another $6.3 billion in unspecified borrowing and payment deferrals.
Those — ahem, ahem — “savings” coupled with $8.3 billion granted to the state in the second phase of the America Cares act would on paper at least cover the full deficit, provided that the feds kick in the $14 billion that the state desires. Should that funding not be forthcoming, the state is looking at 10% spending reductions in K-12 and higher education, elimination of state-funded optional Medi-Cal benefit and dental coverage, and a 10% pay-cut for state employees or else similar measures negotiated with the union in order to reach the same payroll reduction target (i.e. layoffs or furloughs). Already flushed into the memory hole are Gov. Newsom’s earlier plans to extend health insurance to illegal immigrant residents over the age of 65 and subsidize daycare for children of working parents. Among the spending initiatives from the first Newsom budget that is likely to be pared back is the money dedicated to building new subsidized housing for middle-class families and the homeless.
Even if the state manages to wrangle the full $14 billion in additional funding from politicians who find expedience in election year largesse, projections are that this economic slowdown will have implications on the budget that will likely last for at least two more years. So at right around this time next year the state will be either going hat-in-hand back to Washington (with a possible second Trump Administration who may tell them to go pound sand) or making additional cuts and raising revenue. The big wildcards will be whether or not the ruling party can convince Californians to raise property taxes on businesses this fall and whether the legislature will also entertain an attempt to raise income and sales taxes just as Jerry Brown did eight years ago.
But it’s bound to get ugly as we march on towards the budget deadline.
– JVW
Cuts to higher education would be $376 million to the University of California system (an average of $1343 per student), $404 million to the California State University system (an average of $985 per student), and $740 million for the community college system (an average of $352 per student).
JVW (54fd0b) — 5/15/2020 @ 7:46 pmWell, my daughter was turned down by UCLA (no disgrace, they’ve turned down people who were accepted at Harvard), and she was accepted at UCSD but she turned that down, so we escaped that mess.
nk (1d9030) — 5/15/2020 @ 7:58 pmWell, my daughter was turned down by UCLA (no disgrace, they’ve turned down people who were accepted at Harvard), and she was accepted at UCSD but she turned that down, so we escaped that mess.
As a Californian, I’m sorry that our state universities will miss out on her. But if she is out-of-state student (as I seem to recall she is) then she is going to avoid being socked with almost certain huge tuition increases during her four years. It’s going to be fascinating watching one segment of the UC bureaucracy claim that the way through this budget mess is to increase the allotment of high-paying out-of-state students, while another segment insists that we need to focus on
indoctrinating— sorry, training — the next generation of state leaders from within our own ranks.A bunch of kids in my neighborhood were apparently turned down by UCLA too this year, according to social media posts from aggrieved parents. Rumors are that they had a lower acceptance rate than UC Berkeley did.
JVW (54fd0b) — 5/15/2020 @ 8:20 pmI guess that UCLA having the lowest admit rate among UC campuses is nothing new. Also, it appears that a growing number of students are making the decision to spend a year or two in community college before matriculating to a UC campus. Interesting development.
JVW (54fd0b) — 5/15/2020 @ 8:23 pm@4 Given the cost of college and the availability of the community college system, probably most kids should start at the JC and then transfer. It’s a smart and responsible thing to do.
(Yes, I say things like this at school, it’s not always popular with people who care a lot about district ranking data.)
Nic (896fdf) — 5/15/2020 @ 8:34 pmActually, we found UCLA’s low acceptance rate of out-of-state students praiseworthy. California taxpayer schools for California taxpayer kids. But it was worth a shot.
nk (1d9030) — 5/15/2020 @ 8:42 pmAgreed. Even more true now that folks are using Zoom so much.
Dustin (d59cff) — 5/15/2020 @ 9:01 pmCan definitely be a good decision. I’ve had some excellent transfer students do research with me. They also tend to be a bit older by the time they arrive from CC too, which is another advantage in terms of performance and focus.
Dave (1bb933) — 5/15/2020 @ 9:09 pmUPDATE: Stupid me; I should have linked the proposed budget document which kinds of lays everything out. Here it is.
JVW (54fd0b) — 5/15/2020 @ 9:22 pmMaybe they can get help from communist china who’s state media says they will now meddle in 2020 election to defeat trump and other republican to try and help their friends like joe biden in the democrat party. source ace of spaces blog.
asset (7e5ef2) — 5/16/2020 @ 12:14 amI followed your link and read Ace’s post. I also followed it to this post that appears to be the ‘primary’ source.
https://investigativeresearchcenter.org/state-media-china-retaliation-will-impact-u-s-election/
It never mentions US elections directly, it never mentions Biden or the Dems.
Closest they come is talking about the impact economic sanctions might have on elections.
If you have a better source please share it.
Impact on elections
For some US states, China’s sanctions might have a direct impact on the upcoming elections in November if local Republicans have been targeted by the Chinese government for their groundless accusation against Beijing and endless attacks that put China-US relations in a danger, analysts said.
For instance, China is the third-largest export destination for Missouri, after the UK and Canada, for goods and services in 2019 worth $1.1 billion and $775 million, respectively. Some of the top goods exported to China included oilseeds and grains, meat products, and medicine.
“While the Chinese government makes adjustments to business relations between China and states like Missouri or Mississippi, local economies would likely be under pressure, or special interests of certain officials might be affected,” Diao said.
Missouri, together with other states like Michigan, South Carolina and Texas, had taken measures to make it easier for Chinese investment to come in and boost local job growth years ago. For example, in 2013, one week before Chinese company Shuanghui purchased Smithfield Foods, the Missouri legislature amended a law clearing the way for approval.
Time123 (441f53) — 5/16/2020 @ 4:20 amHeh! So the Smithfield coronavirus hot spot in South Dakota is owned by China? Ha, ha, ha! I have said it before, the Soviet comrades were very short-sighted when they said that capitalists will sell them, the comrades, the rope by which the comrades will hang the capitalists. The Chinese comrades will sell the capitalists the rope by which they hang them.
nk (1d9030) — 5/16/2020 @ 5:34 amI see that the US House just passed a proposed 3 trillion dollar package including money for state governments. But look at that total: 3 ttttrillion dollars. For just the most recent of their aid packages.
Tell me if my math is correct. One trillion dollars works out to be about $3,000 per person in the country. Three trillion adds up to almost $9,000 each. (And again, that is only one of the stimulus bills.)
So let’s say that we offered two packages to the public. One would give each family $27,000+…. and the other would let the government fritter away that money in a thousand different ways. Hmm? I will go out on a limb and predict that the Party that approves that first one, before November, wins.
The “Scroo the Lobbyists Act of 2020.”
noel (4d3313) — 5/16/2020 @ 6:23 amIt’s going to be even more fun when Cali’s schools can’t depend on getting Chinese students to pay full freight for their indoctrination. Massive decrease in attendance and student tuition.
NJRob (4d595c) — 5/16/2020 @ 7:30 amGiven the peasant-sheep like attitude of Californians, they should simply dissolve the legislature and elect Newsome Governor for life. It’d save a lot of time and expense.
rcocean (846d30) — 5/16/2020 @ 7:53 amMaybe the Californian Losertarians can do something about the Budget Deficit and return Calf. to smaller Government
Hahaha. Yeah, like ever.
rcocean (846d30) — 5/16/2020 @ 7:57 amWhat Kuhlifornia needs is a mr. terump to make them great again!
Ragspierre (d9bec9) — 5/16/2020 @ 9:50 am@17 Er, um, we will generously allow other states to experience Trump’s creation of greatness first. We, um, wouldn’t want to look like we were bigfooting the other states.
Nic (896fdf) — 5/16/2020 @ 11:50 amOh! Quite right. And only he can fix it. Whatever it is. He’s the one!
Ragspierre (d9bec9) — 5/16/2020 @ 12:17 pm