Gavin Newsom has spent the last four months telling Californians that he could – and would – cure some of California’s most pressing social ailments.
Among those he has cited are a “deplorable” shortage of housing for working families, rampant homelessness, the availability and cost of medical care, the nation’s highest level of poverty, reliable and safe water supplies, shortcomings in early childhood education, and wildfire prevention and protection.
Unusually, he has folded virtually all of his prescriptions for these societal ills into the state budget, a final version of which must, by law, be enacted by June 15.
In other words, the time for talking is over and the time for doing is nigh.
Newsom is blessed with a fat state treasury, thanks to the state’s full-employment economy and the prosperity enjoyed by those at the top of its economic ladder, who generate most of its tax revenues.
Newsom unveiled a revised version of his 2019-20 budget last week and reported having several additional billions of unanticipated dollars, which he divvied up between spending on his agenda and pumping up the state’s reserves against a recession that is bound to occur, although when is uncertain.
“We are preparing for a much different climate,” Newsom told reporters as he boasted of having “dozens and dozens of reserves.”
State budget officials believe that even a moderate recession would slash revenues by about $70 billion over three years, mostly due to declines in taxable incomes among the wealthiest Californians – or roughly three times the state’s “rainy day” funds. Nevertheless, Newsom contends that if he could squirrel away another $10 billion, the state could weather a recession without deep slashes in spending.
So, one might ask, can Newsom deliver a state budget that would make measurable progress towards resolving the big problems he’s cataloged?
Having more money to spend makes the task easier, certainly, but there are some fairly controversial aspects to Newsom’s approaches.
Despite having billions of extra dollars to spend, for instance, he wants to impose a new tax on consumers’ water bills to pay for upgrading local water systems, especially those in the San Joaquin Valley, that have pollution problems.
The need is clear, but taxes on consumers, even relatively small ones, are politically dicey for legislators, and that’s especially true when the commodity being taxed is a necessity like water.
They remember that one Democratic state senator representing a conservative Southern California district was recalled after voting to raise gasoline taxes.
Likewise, many legislators are leery about Newsom’s proposal to fine Californians who don’t buy health insurance – reinstating the “individual mandate” that President Donald Trump has lifted from the federal Obamacare program. Newsom would use the proceeds to pay for health coverage for those who don’t now have it.
Interestingly, Newsom contends that imposing fines on those who don’t purchase health coverage is not taxation, even though the U.S. Supreme Court, in upholding Obamacare declared that the federal individual mandate was constitutional precisely because it reflected the government’s power to “lay and levy taxes.”
Legislative footdragging on these and other issues could be offset by Democratic supermajorities in both legislative houses, allowing leaders to let some members off the hook while still having enough votes to pass a water tax or other controversial proposals.
Also, by folding his agenda into the budget, Newsom can use a quirk in the law that allows budget-related bills to be quickly enacted with simple majority votes, although any new taxes still require two-thirds legislative margins.
CALmatters is a public interest journalism venture committed to explaining how California's state Capitol works and why it matters. For more stories by Dan Walters, go to Commentary.
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