To the surprise of absolutely no one, California’s new governor has proposed a state budget with billions in increased spending and lots of tax hikes. And, as an added bonus, he is proposing new mandates on businesses and local governments as well as depriving Californians of the right to vote on certain kinds of local debt. From the perspective of taxpayers, this is not a propitious start.
Gov. Gavin Newsom’s budget envisions spending $144 billion of general fund dollars, a 4 percent increase over former Gov. Jerry Brown’s last budget, which clocked in at $138 billion. To put this in perspective, general fund spending was less than $100 billion just six years ago. In California, state government is the No. 1 growth industry.
No California spending plan would be complete without new “revenue enhancements.” And the biggest item on this list is the imposition of the “individual mandate” for health insurance. Recall that President Obama’s so-called Affordable Care Act (which was anything but affordable) imposed a burdensome tax on millions of Americans. (Indeed, it was only the fact that the ACA imposed a “tax” that saved it from a constitutional challenge).
The good news is that Congress repealed the tax at the federal level. The bad news is that Gov. Newsom wants to reimpose it at the state level in order to save Covered California from imploding. The cost to Californians for a state-imposed individual mandate with a penalty?: $700 per person, which is projected to raise $500 million in new revenue.
Other tax hikes include a monthly tax imposed on residential water use and a tax to shore up the state’s emergency 911 system. Both deal with public health and safety so one would think they would have first claim on existing general fund revenues — but, again, this is California, where budgeting makes no sense.
Another major concern for taxpayers is Newsom’s plan to deprive voters of the right to vote on local debt. Since statehood, California’s constitution has reflected the policy of allowing voters the right to approve long-term financial obligations. That policy has been eroded over the decades and Newsom is pushing it further by proposing that debt assumed by Enhanced Infrastructure Finance Districts (think “redevelopment”) would no longer need voter approval. Translation: Today’s politicians can put tomorrow’s taxpayers into debt without permission.
So, is there anything good for taxpayers in Newsom’s proposed budget? Yes. This includes Newsom’s desire to grow the rainy day fund — in order to prepare for the inevitable recession — and also paying down pension debt. He also appears cognizant of the OPEB threat. OPEB stands for Other Post-Employment Benefits, the largest of which is, of course, promises for lifetime healthcare benefits to public retirees.
Taxpayers hope that the governor will be able to resist even greater spending demands from state legislators who want $40 billion for new, more costly programs. Nonetheless, our primary concern is that the majority party in California invariably reacts to any new problem — whether actual or imagined — with a tax increase rather than taking the more prudent course of prioritizing spending.
Finally, if there is a coda to this sad story, it is this: State Controller Betty Yee just announced that revenue is down almost $5 billion. Is this a precursor to a recession in the state that will blow up all the governor’s plans? Time will tell.
Jon Coupal is president of the Howard Jarvis Taxpayers Association.
Jon Coupal is the President of the Howard Jarvis Taxpayers Association (HJTA). HJTA, with offices in both Los Angeles and Sacramento, is the largest taxpayers association in California with a membership of over 200,000. Founded by the late Howard Jarvis, the author of Proposition 13, HJTA’s name is synonymous with tax relief and the uncompromising defense of the California homeowner.