California’s $100 billion surplus: What to know about Newsom’s spending plan

**Rasulis** · 2022-05-14, 07:16 AM

I was listening to Newsom budget proposal. WTH??

California’s $100 billion surplus: What to know about Newsom’s spending plan

“Simply without precedent.”

Gov. Gavin Newsom is a man of many superlatives, but even he seemed to struggle today to adequately describe just how much extra cash the state of California will have to spend in the coming year’s budget: $97.5 billion.

Speaking for more than two hours in a press conference in Sacramento, Newsom unveiled his latest record spending proposal for the coming fiscal year. Riding a superheating economy and drawing disproportionately from the state’s highest earners, the state is now projected to have a surplus bigger than California — or any state — has ever had, and significantly more than the $76 billion that the governor predicted in January.

Roughly half of the surplus is required by law to be spent on education. That leaves “only” roughly $49 billion in discretionary money, and the governor wants to reserve 99% of that for one-time spending: $18.1 billion to provide financial relief for Californians buffeted by inflation, plus $37 billion for infrastructure investments, including $5.6 billion for education facility upgrades, and an extra $2.3 billion for the ongoing fight against COVID-19.

A few of the other big numbers that Newsom mentioned today:

$128.3 billion in education spending, from transitional kindergarten through high school, a record-breaking sum that works out to $22,850 per student.
Another $23 billion will be parked into the state’s rainy day fund, to be drawn upon the next time the economy slows

$2.5 billion for housing, including $500 million to fund the conversion of vacant malls and storefronts into homes

An extra $3.4 billion to pay down state employee retirement debt

The massive windfall that the state is sitting on, coupled with the state’s progressive tax system is a sign of “the concentration of wealth and success in the hands of a few that are enjoying abundance in historic and unprecedented ways,” Newsom said. “I am proud of California’s progressive tax system…and we’re the beneficiary of that.”

Now the ball is in the state Legislature’s court as lawmakers decide where they agree with the governor and which priorities they want to haggle over before the June 15 deadline to pass a final, balanced budget for the fiscal year that starts July 1.

Today’s “May revise” rollout is part of the annual call-and-response between the governor’s office and the Legislature over how to spend your tax dollars. Each year, the governor sets the negotiations in motion in January with a preliminary budget proposal. This year, Newsom’s proffer included a record surge in K-12 education spending, along with multi-billion dollar proposals to ramp up the state’s wildfire prevention projects, convert more vacant hotels into housing for the homeless and open up Medi-Cal, the state’s health insurance program for the poor, to all undocumented immigrants.

What Newsom unveiled today is a retake on that earlier budget blueprint, but freshened up with new estimates of the state’s fiscal future. Tack on the extra surplus money and you end up with a new record-high total: $300.7 billion.

When discussing money on the scale of the California state budget, it’s easy to lose perspective. But to be clear, even by Golden State standards, that is an astounding amount of money.

If people are interested, they can read the rest of article themselves. It is pretty long with details on various spending plans. Some of his proposal made me face palm.

And following through on a vow by his predecessor for California to “launch its own damn satellite,” the governor is proposing to spend another $100 million to send up methane-monitoring satellites to monitor climate-warming emissions from livestock.

Why?

This one has my full support.

Still, Newsom’s proposal signals an uncommon stability of funding for the University of California and Cal State systems. Sticking with the plan he first proposed in January, today’s blueprint offers five years of 5% ongoing growth in state funding — a departure from past year-by-year allocations. In exchange, the governor is demanding a range of commitments from the two systems, such as expanded enrollment of Californians, closing graduation rate gaps among racial and social groups and an “aspirational goal of offering every UC undergraduate a pathway for debt-free education by 2029-30.”

Mostly good plans with some "what was he thinking?"

**Kaleredar** · 2022-05-14, 07:51 AM

His proposed "solution" of alleviating gas prices of just giving every Californian 400 dollars seems... poorly thought out. The California GOP's proposed solution of suspending the gas tax altogether is far too drastic in the other direction. Surpluses are nice but they aren't guaranteed, and while I'm sure suspending the gas tax would be insanely popular, should the need for its revenue arise once more reinstating it would be a colossal uphill sell. So dialing the gas tax back a good deal would probably be in order, such that it can be dialed back up if needed without having to sell voters on effectively bringing back a tax.

As far as housing goes, converting defunct properties into houses is nice and all, but it doesn't duck the problems the plague the housing market... rampant speculators driving up prices, foreign investors basically storing money in housing investments with no plans to occupy or otherwise contribute to the economy, and rental companies amassing more and more property to ersatz price collude into driving up the cost of rent (a problem far from unique to California, but one I'd hope they'd be empowered to act on solving.) Building more houses wont solve those problems because these same people could just buy the new homes, and it's not like California is at a lack for land to build on as a whole. Take a drive on 99 and you'll see a host of housing developments that never made it past the road grid phase.

The CARE court thing it points out is also interesting. I'm reticent to support what is, in some ways, dubiously-voluntary compliance, but I would hope with today's level of oversight that abuse wont be an issue and would be stamped out quickly if it appeared.

Hopefully the legislator pushes for more institutional change for some of these plans. But I must say it's fucking nice to see somewhere with a functioning government arguing whether what they're doing is adequately helping people enough, as opposed to the US as a whole that's stuck between one party trying to help people and the other party trying to actively denigrate things for everyone.

**Flame6** · 2022-05-14, 08:13 AM

Well as odd as some of the proposals are I'm very glad to see "99% of that for one-time spending". Throwing a bunch of money at one time projects isn't the greastest but at least you're not committing to any projects that may not have funding down the round. Of the 49 billion that can be spent anywhere (Remember half of the 100 goes to schools) I'm very happy to see nearly half of that number put in the rainy day fund. Even if they spend a lot of it on "junk" that still leaves 1/2 of it to savings, and its not adding to any long term commitments.

I do wonder if it would just be wiser to pay down debt? I'm guessing its not since the interest rates on the debt are low.

**Spectral** · 2022-05-14, 01:32 PM

$128.3 billion in education spending, from transitional kindergarten through high school, a record-breaking sum that works out to $22,850 per student.

Impressive! This is vastly more per student than any OECD nation spends. For such a tidy sum, they've got to have one of the K-12 education systems in the country. Let's pull up US News and World Report and find out. Oh, they're 40th in K-12 education. I suppose throwing some more cash at it should solve the problems, it's probably a real shortage of resources that's resulting poor outcomes. Just a little more and they might teach the kids as well as Arkansas and Kentucky.

There is, obviously, much to recommend California, but the way the state throws money at flailing, incompetent government institutions should irritate residents to no end. Anyone that's ever been to Los Angeles can easily confirm that this is one of the most idiotically run cities in any first-world country, with just astonishingly bad infrastructure and quality of living everywhere you turn. At the end of the day, the state will remain an economic powerhouse and home to the most perfect terrains on Earth though, which covers up for quite a few sins of leadership.

**Unholyground** · 2022-05-14, 01:49 PM

Cull the weak! That should be enough to do it.

**Rasulis** · 2022-05-14, 05:28 PM

Originally Posted by Kaleredar

His proposed "solution" of alleviating gas prices of just giving every Californian 400 dollars seems... poorly thought out. The California GOP's proposed solution of suspending the gas tax altogether is far too drastic in the other direction. Surpluses are nice but they aren't guaranteed, and while I'm sure suspending the gas tax would be insanely popular, should the need for its revenue arise once more reinstating it would be a colossal uphill sell. So dialing the gas tax back a good deal would probably be in order, such that it can be dialed back up if needed without having to sell voters on effectively bringing back a tax.

Not shown in the CalMatter's article, but I thought I heard him mention suspending gas tax for diesel fuel for a year.

- - - Updated - - -

Originally Posted by Spectral

There is, obviously, much to recommend California, but the way the state throws money at flailing, incompetent government institutions should irritate residents to no end. Anyone that's ever been to Los Angeles can easily confirm that this is one of the most idiotically run cities in any first-world country, with just astonishingly bad infrastructure and quality of living everywhere you turn. At the end of the day, the state will remain an economic powerhouse and home to the most perfect terrains on Earth though, which covers up for quite a few sins of leadership.

From all the buzz around town, San Francisco is pretty badly run also. Although I haven't had anything to complain about. My only contact with City Hall so far was limited to obtaining permits for our solar panel/battery system and associated appurtenant (electrical panel & heat pump, etc.) That was pretty smooth and the fee was low. The inspection was straightforward. Especially considering that our electrical network topology was a bit non-standard with 2 units sharing the same rooftop solar and batteries.

**PC2** · 2022-05-14, 05:41 PM

I'd rather they use the money to pay off any public debts that exist, or give the money back to the citizens they got it from. Apparently half of this surplus will go to public education which doesn't actually give people real world knowledge and skills anymore.

Hopefully I'm wrong though and all of this funding brings in large returns in the future. We'll see.

**Elegiac** · 2022-05-14, 05:47 PM

Originally Posted by PC2

I'd rather they use the money to pay off any public debts that exist, or give the money back to the citizens they got it from.

Considering it's derived primarily from taxation on the wealthiest citizens who are in no way hurting from it: no, they absolutely should not 'give it back', they should be spending it on projects that alleviate California's housing and transportation issues for its lower to middle income residents.

Apparently half of this surplus will go to public education which doesn't actually give people real world knowledge and skills anymore.

You have no idea what you're talking about, as usual.

**Rasulis** · 2022-05-14, 05:56 PM

Originally Posted by PC2

I'd rather they use the money to pay off any public debts that exist, or give the money back to the citizens they got it from. Apparently half of this surplus will go to public education which doesn't actually give people real world knowledge and skills anymore.

Hopefully I'm wrong though and all of this funding brings in large returns in the future. We'll see.

Part is going to pay off state retirement system debt. We do need to take into account that the state is only responsible for one-third of California debt. The other two-third of the debt belong to Cities, Counties, and various municipal districts.

**Endus** · 2022-05-14, 06:03 PM

Originally Posted by UnifiedDivide

Are you complaining that money is being spent on educating people? Aren't you all about people getting more education to get more knowledge so that people can solve all that ails the world?

He doesn't want people learning fanciful things like "history" or "civics" or "language skills", he wants them prepped to be line workers for STEM companies and nothing else, because he has this misbegotten idea that science is literally magic. See his repeatedly stated belief in magical nonsense like infinite growth and that science can always perfectly solve any problem.

**Spectral** · 2022-05-14, 06:07 PM

Originally Posted by PC2

I'd rather they use the money to pay off any public debts that exist...

Why? We're talking about California here specifically, but I actually mean that more broadly - why would it presently be advantageous to pay down debt? From my perspective with a personal mortgage as well as some business debt, the current inflation environment means that any assets that I have financed from previously low interest rates are becoming less of a burden over time. I have cash on hand, but I have zero desire to pay down loans that are financed for significantly less than the present rate of inflation - better to pursue investment opportunities than to try to avoid a negative real interest rate.

While state policy isn't the same as personal investment advice, much of the same rings true there - why should California prefer paying down negative interest rate debt to investing in infrastructure improvement (or whatever you think might be useful)?

**PC2** · 2022-05-14, 07:23 PM

Originally Posted by Spectral

Why? We're talking about California here specifically, but I actually mean that more broadly - why would it presently be advantageous to pay down debt?

Why is less debt better than more? For me I like it because it shows restraint and it puts the society in a better financial(credit) position in the future. Although I admit that this is not necessary for any state or country because debt can always go up over time and it can be sustainable forever. As long as we don't go too crazy like they did in Greece a while back.

Originally Posted by Spectral

From my perspective with a personal mortgage as well as some business debt, the current inflation environment means that any assets that I have financed from previously low interest rates are becoming less of a burden over time. I have cash on hand, but I have zero desire to pay down loans that are financed for significantly less than the present rate of inflation - better to pursue investment opportunities than to try to avoid a negative real interest rate.

While state policy isn't the same as personal investment advice, much of the same rings true there - why should California prefer paying down negative interest rate debt to investing in infrastructure improvement (or whatever you think might be useful)?

I'm not sure about that point, I want the government to make economical and financially efficient choices but part of me feels like that might be an overly contextual way of reasoning which is only relevant right now. If you apply the mentality of a private investor to the government then it seems like it will exceed the role of government, imo.

**unfilteredJW** · 2022-05-14, 07:46 PM

Originally Posted by UnifiedDivide

I kinda want to see how he tries to reconcile his bemoaning of money being spent on education and his not-at-all-old position of gaining knowledge toward this magical science of solving all things. I mean, he won't, he'll just ignore these posts between us, but boy would it be interesting.

They proudly wear a “I Wuz Home Scooled” tshirt.

**PC2** · 2022-05-14, 11:27 PM