California Continues to Boom -- State Budget Has $6.1 Billion Surplus! (house, school)

[Elliott_CA]

California's economy continues to boom, extending a growth trend that started several years ago, helping the state to produce a $6.1 Billion budget surplus.

Governor Brown wisely wants to deposit $3.5 Billion into the rainy day fund to be used as a revenue source whenever the next recession hits. Gov. Brown has been an excellent manager of the budget -- he's a rare bird known as a "frugal Democrat." Politicians in Washington could learn from him.


https://www.mercurynews.com/2018/01/...-state-budget/

p.s. -- I'm sure someone will reply and say California has some huge amount of unfunded liabilities, pensions, etc. That may be true to some extent but it's not payable all at once, the liability is spread over decades and is therefore manageable.

[Tulemutt]

Yeah but but but ....... (incoming)

[Vic Romano]

So why did we need the extra 12 cents gas tax???

[checkup]

I believe it's $5B going to the rainy day fund, making the total $13.5B

But as Brown said, we should anticipate a recession coming within a few years. Projections suggest that even a slight recession will cause the small $6B surplus to turn into a $20B deficit for at least a few years

My only hope is that Brown's successor is as frugal and prudent as he was. (He inherited a $27B deficit when he took over in 2011.) But that's unlikely; his successor will probably be a more progressive Democrat who will spend the surpluses on education, the Bullet Train, trying to compensate for the SALT limitations, and other projects -- and that'll lead to huge deficits and cuts once the next recession hits (probably around 2020)

[checkup]

Originally Posted by Vic Romano

So why did we need the extra 12 cents gas tax???

Have you seen the state of our roads and bridges? Also, just wait for the next recession

[wac_432]

Originally Posted by checkup

My only hope is that Brown's successor is as frugal and prudent as he was. But that's unlikely; his successor will probably be a more progressive Democrat who will spend the surpluses on education, the Bullet Train, trying to compensate for the SALT limitations, and other projects -- and that'll lead to huge deficits and cuts once the next recession hits (probably around 2020)

^^ This times infinity!

We need to send moderate democrats and fiscal conservatives to the statehouse! Let's keep our own house in order so we can stay the course when the country gets run off a cliff!

I'm all for fighting back against the off-the-rails federal executive by sending radical liberals to the national congress, though.

...

While this is good news for California, and hopefully we get another couple of years of surplus so the minimum mandated 1.5B will continue to flow into the rainy day fund, other states are in BAD shape. I don't know how they're going to manage when the next downturn hits.

Oregon has over a Billion dollar budget shortfall. Kansas is in even rougher per-capita shape. And this is boom time!! These states that have let the radical left and radical right respectively run their budgets right into the ground, should serve as cautionary examples to the rest of us. Keep it reasonable and moderate on the state/local level.

...

What is really scary, is that a lot of so-called "fiscally responsible" states are also failing. They have a narrative of a balanced budget, but that is actually smoke-and-mirrors.

Indiana is a good example. The VP's home state has "balanced" their budget the last few years by slashing across-the-board funding.

Basically, the governor said "I can't be seen as the one who put Indiana in the red or raised taxes." So he just directed all state agencies to hold back 5% of their budget as a safety margin. Indiana tax revenue didn't meet expectations, so 3% of that money stayed slashed, and Indiana eked out a marginal surplus by under-funding infrastructure and social services. In the boom time.

And Indiana is a federal "taker" state. While California only gets $0.80 from the fed for every $1.00 it pays in taxes, Indiana gets $1.50 for every $1.00 it pays. So we here in "Liberal California" are already propping up this "fiscally conservative" state, through federal redistribution of our wealth to them.

And that's an example of a state that's in decent shape. What about it's neighbor, Illinois, or Ohio?
What's going to happen when the next recession hits?

All the more reason we need to squirrel away a rainy day fund, ourselves. California needs to take care of California. When the rain comes, the pigs are going to be squealing at the trough, but with recent federal tax cuts, plus a recession, that trough is going to be looking mighty mighty empty.

[checkup]

Jerry Brown has also advocated for cutting pension benefits for state employees and opined that CA courts should reverse prior rulings finding the level of such benefits inviolable

https://www.bloomberg.com/news/artic...ts-in-downturn

There's a separate thread on this

[Elliott_CA]

Originally Posted by checkup

I believe it's $5B going to the rainy day fund, making the total $13.5B

This is old school Keynesian economics: hold the line in good times, build up a surplus fund, then spend more in recessions to stimulate the economy into the next boom, ad infinitum. This cyclical budget approach helps to smooth out excesses in the economy. It's unfortunate that it is so rarely practiced. Politicians don't have the discipline to hold back on spending during the flush times.

[payutenyodagimas]

Originally Posted by Elliott_CA

Politicians don't have the discipline to hold back on spending during the flush times.

they also cut taxes instead of taxing more and paying the debts incurred propping up the economy during the recession.


I wonder what trick will they do when the next recession comes in

[Mr5150]

Say it isn't so!