Taxes continue to pour into the state treasury. Thanks to the engine of California’s private economy – the creativity of business leaders and productivity of employees – and the wealth it creates, Governor Gavin Newsom last week announced that revenues exceeded earlier budget estimates by more than $3 billion, enabling him to propose reserves, paying down debt, and boosting education spending.
Californians have enjoyed nearly 10 years of economic growth, and one of the biggest beneficiaries has been the state budget. Since the recession, the state budget has increased by 82% – that’s more than $95 billion. This is unlike the recession years when the Governor and Legislature were forced to cut tens of billions of dollars in spending.
Today with a budget and continuing prospects for growth, Governor Newsom has set aside $16.5 billion in a rainy-day reserve to hedge against the next economic downturn and continued to boost education spending. In addition, he proposes spending more than $9 billion to pay down unfunded pension liabilities and pay off longstanding debts and deferrals.
When he released his revised budget proposal last week, Governor Newsom recognized a key responsibility for a chief executive is to protect against shrotfalls and insisted that “We need to have a structurally balanced budget because we are entering the end of the beginning of a new phase of economic reality. The headwinds are real.”