California Gov. Jerry Brown knows just what to do with a state budget surplus

posted at 7:21 pm on January 9, 2014 by Erika Johnsen

This is a story from the New York Times in September of 2012, around the time that California Gov. Jerry Brown was cobbling together his plan to tackle the “wall of debt” facing his state and just before voters elected a Democratic supermajority and approved the tax-hiking ballot provision, Proposition 30.

Gov. Jerry Brown of California announced when he came into office last year that he had found an alarming $28 billion “wall of debt” looming over the state, which had to be dismantled. …

On Thursday, an independent group of fiscal experts said Mr. Brown’s efforts were all well and good, but in fact, the “wall of debt” was several times as big as the governor thought.

Directors of the State Budget Crisis Task Force said their researchers had found a lot of other debts that did not turn up in California’s official tally. Much of it involved irrevocable promises to provide pensions to public workers, health care for retirees, the cost of delayed highway maintenance and an estimated $40 billion bill to bring drinking water up to federal standards. …

The task force estimated that the burden of debt totaled at least $167 billion and as much as $335 billion. Its members warned that the off-the-books debts tended to grow over time, so that even if Mr. Brown should succeed in pushing through his tax increase, gaining an additional $50 billion over the next seven years, the wall of debt would still be there, casting its shadow over the state.

Nutshell version: California has up to $335 billion in liabilities, and even the long-term results of the surplus Gov. Brown was planning on won’t be nearly enough to address the state’s systemic spending and debt problems — and this is to say nothing of the multiple municipal bankruptcies in the state over the past few years, nor the $70-billion-and-counting high-speed rail project on which Brown is refusing to cut the state’s losses before things really start to go downhill.

It’s now been over a year since that article appeared, and the first round of that state surplus is coming in (administration officials expect a $4.2 billion total surplus come June) — but what is Gov. Brown planning to do with it? Grow the state’s annual general-fund spending by more than eight percent to almost $107 billion, of course:

Soaring revenue from an improving economy and voter-approved tax increases have put the nation’s most populous state in the rare position of having a projected multibillion dollar budget surplus, a financial surprise that has fueled the big-spending dreams of Democratic state lawmakers. Brown proposes an 8.5 percent boost in spending from the current year’s budget, but also takes aim at nearly $355 billion in unfunded liabilities and debts.

“In the face of such liabilities, our current budget surplus is rather modest,” the governor wrote in the leaked budget summary. “That is why wisdom and prudence should be the order of the day.”

His budget proposal for the 2014-15 fiscal year dedicates $11 billion to paying down the debts and liabilities. That includes $6 billion in payments that had been deferred to schools and nearly $4 billion to pay down the so-called economic recovery bonds left over from administration of Gov. Arnold Schwarzenegger.

The document notes that the state’s revenue surge is due mostly to volatile sources, including capital gains and higher income taxes from Proposition 30, Brown’s tax initiative. Some $4 billion in extra revenue alone will come from capital gains, driven largely by the soaring stock market.

Granted, he is emphasizing the need to start paying down their debts, and he’s going to have to defend even this modest payback proposal from the apparently depraved and full-on Democratic legislature gunning for even higher spending increases — but it’s still a relatively craven proposal in the face of California’s dire fiscal situation. California politicians seem to be happy to pat themselves on the back about the whole thing, but I do not see this ending well at all.


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ROFL

Such a beautiful piece of property being ruined.

Bishop on January 9, 2014 at 7:24 PM

Detroit writ large on the West coast.

Morons.

locomotivebreath1901 on January 9, 2014 at 7:27 PM

There’s always money found for illegal alien programs.

TimBuk3 on January 9, 2014 at 7:27 PM

All of the surpluses in CA are fake and based on budgetary gimmicks. Similarly, they always lie about the size of the deficits. This is getting to be cliche, but if these guys were in the private sector, they’d be in jail.

besser tot als rot on January 9, 2014 at 7:27 PM

Really, Bishop? Are you really rolling on the floor laughing? Pics or it didn’t happen.

John the Libertarian on January 9, 2014 at 7:28 PM

Some $4 billion in extra revenue alone will come from capital gains, driven largely by the soaring stock market.

Be sure to factor that in for next year and, well, in perpetuity, right?

WitchDoctor on January 9, 2014 at 7:31 PM

Economics, that’s something the democrats don’t do.

tim c on January 9, 2014 at 7:33 PM

According to most sources the Kalifornia debt is $419 billion. This does not include any unfunded liabilities. Just straight up bond issues.

jukin3 on January 9, 2014 at 7:35 PM

Moonbat.

CWchangedhisNicagain on January 9, 2014 at 7:35 PM

Brown is increasing spending by 8% and he’s not even including universal preschool in his budget, which the leader of the State Senate says he wants to do this year.

Mark1971 on January 9, 2014 at 7:36 PM

As the saying goes, you can’t fix stupid

There Goes the Neighborhood on January 9, 2014 at 7:37 PM

Taxis/Spendis,

Spend’er down baby!!

canopfor on January 9, 2014 at 7:39 PM

Moonbeam

Murphy9 on January 9, 2014 at 7:40 PM

…math is hard!

KOOLAID2 on January 9, 2014 at 7:40 PM


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canopfor on January 9, 2014 at 7:41 PM

It is a sad and tragic destruction of a beautiful state. Sadly, it will ultimately affect us all.

cww on January 9, 2014 at 7:42 PM

If he really wants to save California money he should sh*t-can the High-speed Rail to Nowhere.

myiq2xu on January 9, 2014 at 7:43 PM

The concern we all should have is how do we take steps now to build a firewall between the unfunded obligations of States like California and federal funds? NOW is the time to act on this. When the crisis hits it will be far to late to win the argument that the federal government should not assume these obligations. Short of an express Constitutional amendment, I’m not sure such a firewall can be built.

Over50 on January 9, 2014 at 7:45 PM

When you get elected on I have free money I don’t see what choice they have. No money no votes. It will stop when the money stops.

CW20 on January 9, 2014 at 7:47 PM

The concern we all should have is how do we take steps now to build a firewall between the unfunded obligations of States like California and federal funds? …

Over50 on January 9, 2014 at 7:45 PM

No Dem. will ever agree to this. No money no Calif. No Calif. no Democratic party. The flood gates will open and Brown knows it.

CW20 on January 9, 2014 at 7:49 PM

If he really wants to save California money he should sh*t-can the High-speed Rail to Nowhere.

myiq2xu on January 9, 2014 at 7:43 PM

You’re behind the times. It’s now a “mixed use” Rail to Nowhere, and trains will never exceed 80 mph, in the unlikely event that it’s ever actually built.

peski on January 9, 2014 at 7:50 PM

The concern we all should have is how do we take steps now to build a firewall between the unfunded obligations of States like California and federal funds?

Over50 on January 9, 2014 at 7:45 PM

California’s obligations are chump change compared to the unmeetable obligations of the federal government.

besser tot als rot on January 9, 2014 at 7:55 PM

No problem, too big to fail.

Those who produce will bear the burden of bailing out that self-made mess.

rightside on January 9, 2014 at 7:55 PM

Clearly Barack Obama isn’t the only executive to talk about one thing, and then doing something completely different.

juanito on January 9, 2014 at 9:05 PM

So far, no mention of that (multiple expletives) high-speed rail transit line.

listens2glenn on January 9, 2014 at 9:09 PM

“In the face of such liabilities, our current budget surplus is rather modest,” the governor wrote in the leaked budget summary. “That is why wisdom and prudence should be the order of the day.”

Should they ever not be?

Tzetzes on January 9, 2014 at 9:11 PM

It’s impossible to get a fix on what the hell is happening in this state. The assessment out of Stanford a couple years ago said CA had a $500B pension deficit problem. A few years ago we threw out Gray Davis over a persistent operating budget deficit of $20-25B. Brown raises taxes and suddenly all the newspaper reporting says that CA is flush with cash again. Other reporting says that CA is now holding lots of debt off the books and that the financial chicanery continues.

Does anybody have any f**king clue what is going on is this state? I’m stuck here for a few more years and would actually like to see the whole thing blow up–if for no other reason than to tell my liberal friends that they were always full of shit and they just didn’t know it yet.

Mirrors. They’re doing it with mirrors.

PD Quig on January 9, 2014 at 9:13 PM

Give the western seaboard to Mexico.

Axe on January 9, 2014 at 9:41 PM

The document notes that the state’s revenue surge is due mostly to volatile sources, including capital gains and higher income taxes from Proposition 30, Brown’s tax initiative.

The Democrats will do exactly what they did the last time they had a ‘surplus’.

THEY’LL SPEND IT!

Meanwhile, Moonbeam trucks on with his ‘bullet train’.

GarandFan on January 9, 2014 at 9:41 PM

Jerry Brown knows just what to do with a state budget surplus …

Other people’s money is for spending.

Pork-Chop on January 9, 2014 at 9:45 PM

Moonbat.

CWchangedhisNicagain on January 9, 2014 at 7:35 PM

Worse. Progressive.

No biggie, if the Dems hold the Senate and win the House back, rest assured Detroit, California AND Cook County, IL will receive oodles of freshly minted “Promise Zone” cash to really get it right this time!

BlaxPac on January 9, 2014 at 10:06 PM

Give the western seaboard to might as well belong to Mexico.

Axe on January 9, 2014 at 9:41 PM

Fixed…Yer Welcome. o_O

BlaxPac on January 9, 2014 at 10:08 PM

Is there anyone here old enough (other than me) to remember when California was the best that America had to offer? It literally was the land of milk and honey. Now after decades of hippies, liberals, illegals, Hollyweird, eco-freaks and other assorted nutjobs, it’s just Detroit on steroids. What a freaking waste. Kind of sad really.

lfwest on January 9, 2014 at 10:44 PM

“That is why wisdom and prudence should be the order of the day.”

OBTW Wisdom and Prudence are a pair of hookers down on Sunset blvd. They work as a team.

Oldnuke on January 9, 2014 at 10:47 PM

What surplus?

peski on January 9, 2014 at 7:48 PM

What I was thinking.

Dr. ZhivBlago on January 9, 2014 at 10:49 PM

If he really wants to save California money he should sh*t-can the High-speed Rail to Nowhere.

myiq2xu on January 9, 2014 at 7:43 PM

A judge already did that earlier this week. Still, it won’t make a dent in their liabilities.

riddick on January 9, 2014 at 11:10 PM

He needs the money to build his toy-train.

Another Drew on January 10, 2014 at 12:30 AM

The solution to underfunded pensions is easy.

Just pay the pensions and health care in full and also tax back the unfunded and underfunded portion of any such pension.

Everyone directly involved has a reasonable responsibility to make sure these promises are met by one means or another during the time of their tenure, not after their retirement.

Just ignoring their golden parachute fantasies and dumping the problems created on general taxpayers is a cop out. Tax those who enter into unrealistic contracts should pay for the folly of their ways. If taxing is a solution, then tax them, not the general population to fix the problem.

drfredc on January 10, 2014 at 1:16 AM

How could he possibly know what to do with a surplus, He’s never had a real one!

jaydee_007 on January 10, 2014 at 1:50 AM

The document notes that the state’s revenue surge is due mostly to volatile sources, including capital gains and higher income taxes from Proposition 30, Brown’s tax initiative.

The Democrats will do exactly what they did the last time they had a ‘surplus’.

THEY’LL SPEND IT!

Meanwhile, Moonbeam trucks on with his ‘bullet train’.

GarandFan on January 9, 2014 at 9:41 PM

Slight correction here, they will spend it several times over.

jpmn on January 10, 2014 at 7:16 AM

Most of you appear to have missed the key part of the story: Governor Moonbeam, Jerry Brown, is the relatively sane actor in the play in Sacramento.

The California Voters, In Their Wisdom, elected 2/3rds Democrat majorities in both House of the State Legislature, and those guys make Brown look like Sarah Palin.

Of course the funniest part of this whole thing is that you guys out there in Wyoming and Georgia are eventually going to be paying for all of this California fiscal profligacy.

fadetogray on January 10, 2014 at 7:48 AM

California still has a financial out a few years down the line, as the technology improves, but as with New York State, my guess is they’d rather go deeper in to debt and have the other 49 48 states bail them out than approve fracking the Monterey Shale. Or even if they do OK it — since the formation is in the Republican-leaning parts of the state — they won’t use the money to pay down a dime’s worth of debt, but will just throw it away on more costly and unneeded programs and public sector union benefits.

jon1979 on January 10, 2014 at 8:11 AM

And Democrats want this guy to run for President.

Old eagle on January 10, 2014 at 10:31 AM