Is California on the Freeway to Fiscal Sanity?
Gov. Jerry Brown is working hard to break the state's cycle of boom and bust. The voters seem to like his ideas.
California Gov. Jerry Brown has waged three presidential campaigns and a U.S. Senate run. He's been a big-city mayor as well as California's attorney general and secretary of state, and he has served two stints nearly 30 years apart as governor. Perhaps it's because he's seen it all -- or maybe just because, at 76, he doesn't have his eye on the next rung of the ladder -- but Brown's recent fiscal actions demonstrate an admirable commitment to eschewing politics and making the state's long-term interests his top priority.
Last month Brown reached a bipartisan deal with legislators to replace a rainy day fund measure that was to appear on the state's November ballot with a stronger one that would set aside up to 10 percent of general fund revenues for the rainy day fund and, for the next 15 years, dedicate half that money to pay down the state's debt and unfunded liabilities. One estimate pegs those long-term liabilities at $355 billion, including about $218 billion in unfunded pensions and almost $65 billion in deferred maintenance.
Also last month, Brown filed an amended budget proposal that reflects both tax revenues that have come in above projections and several higher-than-expected costs, the largest of which is the state's health insurance plan for the poor. The new plan includes a proposal to pay down $74 billion in unfunded teacher pension liabilities over 30 years. Costs would be split among the state, school districts and teachers, with the state making a $450 million contribution during the coming fiscal year.
Since Brown filed his original budget, updated estimates of how long state retirees are likely to live added $1 billion to projected pension costs over the next three years. Rather than just push those costs into the future, Brown's amended budget puts $254 million toward the increased liability.
The legislature has until June 15 to act on the budget, and the strongest opposition is likely to come from Brown's own party. Many Democrats want to use more of the rebounding revenues to restore social-services spending that has been slashed during the last recession.
But Brown is trying to break the cycle of boom and bust. Instead of spending more on social services now, only to see it slashed again in the next downturn, he is seeking to beef up the rainy day fund and pay down liabilities that siphon billions from the state budget each year. The structure he is working toward is one that could better withstand economic ups and downs and create a more consistent state safety net.
A statewide poll conducted in May found that, by a 57-to-39-percent margin, likely California voters approve of Brown's efforts to get a state known for its freewheeling fiscal ways to pay down debt and save money to cope with the next recession. Perhaps, like their governor, the voters have also grown weary of boom and bust.
We invite you to discuss and comment on this article using social media.
NEW ON THE PODCAST