Market Turmoil Haunts Jerry Brown’s 2016 Agenda

Jerry Brown (Rich Pedroncelli / Associated Press)
Rich Pedroncelli / Associated Press

California Governor Jerry Brown delivered his annual “State of the State” address to the legislature on Thursday, against the backdrop of a volatile stock market that could threaten the state budget surplus he achieved, and cause future fiscal uncertainty.

“In that spirit,” Brown told legislators, “you are not going to hear me talk today about new programs. Rather, I am going to focus on how we pay for the commitments we have already made.”

Brown warned that the state’s fiscal health was too fragile, and that he intended to build up the state’s reserves:

According to economists at the Department of Finance, the next recession, even if it were only of average intensity, would cut our revenues by $55 billion over three years. That is why it is imperative to build up the Rainy Day Fund – which was recently overwhelmingly approved by the voters – and invest our temporary surpluses in badly needed infrastructure or in other ways that will not lock in future spending.

We must also be realistic about our current tax system. California has a very progressive but volatile income tax that provides 70 percent of General Fund revenues. If we are to minimize the zigzag of spend-cut-spend that this tax system inevitably produces, we must build a very large reserve.

In addition to saving, Brown proposed raising taxes to pay for the state’s $77 billion in deferred road maintenance:

We have no choice but to maintain our transportation infrastructure. Yet, doing so without an expanded and permanent revenue source is impossible. That means at some point, sooner rather than later, we have to bite the bullet and enact new fees and taxes for this purpose. Ideology and politics stand in the way, but one way or another the roads must be fixed.

Brown also boasted about measures taken under his administration to reduce economic inequality, expand access to health insurance, and spend more on public education.

Curiously, Brown did not make direct mention of his two most controversial pet projects–the Delta Tunnels project, to move water from north to south under the San Joaquin Delta, and the High-Speed Rail project, which the majority of California voters oppose.

In a statement, Senate Minority Leader Emeritus Bob Huff (R-San Dimas) responded to Brown’s address:

I appreciate and support the Governor’s continued emphasis on fiscal restraint and I’m pleased he won’t be supporting efforts to permanently increase spending in the state budget through the creation of new programs or spending commitments. At the same time, I do have concerns about the Governor’s desires to raise taxes on California families to pay for transportation infrastructure commitments. We can use existing funding to pay for these visions, just as the Governor’s father did when he was Governor. If, for example, the Governor had changed his statement from ‘bite the bullet’ to ‘bite the bullet train,’ he would have earned a lot more Republican applause.

All in all the State of California is in good fiscal health, and that is thanks to the efforts of this Governor and a Legislature that has managed to tame its vast appetite for spending money or creating new programs. While the Governor does have some noble goals, he wasn’t real specific as to how he wants the Legislature to reach those goals. I’m sure that is what will occupy the Legislature’s time as we move forward to implement our vision for a better California.