California Economic Policy

By pjain      Published July 6, 2021, 5:48 a.m. in blog Geo-Politics   

  • ['Old clunkers': California power plants break down during heat wave](https://www.politico.com/states/california/story/2021/06/30/old-clunkers-california-power-plants-break-down-during-heat-wave-1387507}
  • [Drivers used to pay for roads. Washington is killing that idea.](https://www.politico.com/states/california/story/2021/06/30/drivers-used-to-pay-for-roads-washington-is-killing-that-idea-1387515}

California Economic Policies 2021

2021 $76b surplus on Massive IPOs and Stock Sales by Rich

California expects a staggering $75.7 b general fund surplus across two fiscal years — the current one FY'21 plus the year that starts July 1. This is stunning as people were talking last year about a $54 billion shortfall at height of Covid-19.

The state has a progressive income tax structure that leans heavily on top earners, allowing the state to enjoy record revenues

  1. California's coffers are bulging thanks to the high-flying Silicon Valley, surging stock market

  2. While state services have probably cut extra and contract employment as state offices closed, from state park rangers to janitorial services, etc. This includes social services that were cut in the Great Recession.

  3. Income tax collections kept apace as a large share of the richer techies and professionals who were able to continue working remotely during Covid-19.

  4. Poor and Minimum Wage Employees Don't Matter as UE Spikes. Surplus is despite a year of pandemic closures which hurt normally strong leisure and travel industry and widespread job losses that have kept California's unemployment rate among the nation's highest.

    Places that are highly reliant on tourism, like Nevada and Hawaii, were hit harder than most other states. According to the Urban Institute, from the time period of April 2020 through March 2021, actual revenue collections are still below what they were a year earlier in 17 states.

  5. California is due to receive $26 billion in direct federal aid in just 2021 on top of tens of billions in 2020. Federal Congressional Republicans, had argued for a smaller federal stimulus package this winter vs the $1.9b Biden American Rescue Plan Act and pointed to California as a poster child for why some states don't need assistance.

  6. PROBLEM WHY THIS SURPLUS IS NOT ALL IT SEEMS. Newsom's surplus estimate includes $27 billion in constitutionally required spending on schools and community colleges, nearly $8 billion in required reserve deposits, and $3 billion in required debt payments in his calculation of the surplus. Problem While California has a constitutional requirement to allocate a certain percentage of revenue to K-14 education, it does not prescribe how those dollars are spent, he said, which is why Newsom included those dollars in the surplus figure.

$263 b Budget fighting

California lawmakers approved state budget plans Monday just three days before the new fiscal year, moving the Legislature closer to a final deal with Gov. Gavin Newson after drawn-out negotiations about how to best spend a record $262.6 b

The budget includes record-high reserves of $25.2 billion and record-high education funding of $93.7 billion. Major budget priorities include homelessness programs and a universal transitional kindergarten plan.

  • $66b K-12
  • $22b Higher Education
  • $17b Prisons
  • $21.4b Transportation
  • $19b Administration, General
  • $16b Legislative, Judicial and Executive - WTF?
  • $6 Environmental protection (including billions for wildfires?
  • $4b Government Operations
  • $3.6b Business, Consumer Services and Housing
  • $1.7 b Labor and Workforce development

  • [California lawmakers approve budget — again — as Newsom talks continue](https://www.politico.com/states/california/story/2021/06/29/california-lawmakers-approve-budget-again-as-newsom-talks-continue-1387338}

Misguided spending of $77 "Surplus" - Spend Big - no Future Investment

In a pitch to voters ahead of possible recall Newsom is burning the money like no tomorrow, proposing the surplus spent on

  • $12 b in $600 checks for middle-income making <$75/yr residents (many illegal) along with $500 payments to families with dependents. California in February enacted an initial round of payments for its lowest-income residents, supplementing two rounds of similar checks from the federal government.

  • $11 b to reserves and debt payments.

  • $1.5 b to add another round of small business grants up to $25,000, for a total of $4 billion in small business aid.

  • The state’s Employment Development Department has floundered under a massive backlog of unemployment claims which continues to grow even as Californians begin to return to work. Newsom proposed spending a total of $305 million to help clear the backlog, implement a system for direct deposit and improve access for foreign language speakers.

  • $6 billion plan PENDING to improve broadband infrastructure and a wildfire prevention package that was criticized Monday for containing less money than proposed this spring.

  • $38 boost other programs

  • provide Medicaid for all undocumented immigrants over 50
  • increase support for homeless residents
  • expand child care
  • bolster social services that were cut in the Great Recession.
  • [States faced financial ruin. Now they’re swimming in cash. - POLITICO](https://www.politico.com/news/2021/07/07/states-financial-status-pandemic-498403}

  • State law requires taxpayers get a rebate when there’s a big surplus, which’ll likely be the case in 2021, though the numbers won’t be finalized for a couple years.

Health Spending is MASSIVE

Overall, the budget includes $207.7 billion for all health and human services programs, by far the largest for any category. That includes $54 billion in general fund money and $153 billion in other funds.

The plan would spend $50 million from the general fund to expand Medi-Cal coverage for the first time to undocumented seniors, ages 60 and over, beginning May 2022. Health advocates have been pushing for this in recent years, and have emphasized the need for the change in light of the heavy impact the pandemic has had on immigrant communities. Undocumented Californians up to age 26 are currently eligible for the program.

The May Revise also budgets $106 million in general fund dollars over three years to strengthen older adults’ recovery and resilience from isolation and health impacts caused by the pandemic.

  • $80.5b Health, Human Services, Medical

Social Welfare, Undocumented Stimulus

$4 billion over five years to provide behavioral health treatment to all Californians under the age of 25,

$2 billion to create $500 college savings accounts for millions of children.

Education HUGE Teachers union - while schools suck!

The budget includes $93.7 billion in Proposition 98 funding for public schools and community colleges — nearly $14,000 per student. That doesn’t include an additional $15 billion for K-12 schools and $2.3 billion for community colleges from the federal government.

  • $66b K-12
  • $22b Higher Education
  • $27 b to K-12 schools and community colleges under state requirements,

Newsom announced $20 billion to “reimagine public schools,” including a $2.7 billion proposals to extend transitional kindergarten to every 4-year-old saying "We are creating a new grade in the state of California: TK," Newsom said. The state estimates this will eventually serve 250,000 children across the state.

Insane Housing and Homeless SPEND - while Unaffordable forces people out!

  • $9.3 billion on a range of housing programs, including homeowner and renter relief assistance. That total includes $3.5 billion to help create more affordable housing for low-income families, up from $3 billion in his January budget.

The updated budget also includes $5.2 b in federal rental assistance funds for those facing hardships due to the pandemic. This $5 billion toward back payments of rent. Newsom signed that proposal hours late June.

  • The governor’s revised budget also calls for spending $1 billion to help families experiencing homelessness or at risk of being homeless.

  • $12 b as Newsom WANTS to spend over 3 years to address one of California’s most vexing problems: Homelessness. He budgeted $6.8 billion on homelessness for the upcoming fiscal year, up substantially from the $2.1 billion he outlined in January. The governor’s plan would spend $3.5 billion to purchase and refurbish motels, hotels and other homeless housing units over the next two years through the Homekey initiative. **A lot of this is likely heavy over spending, eg providing a SFO tent in parks were estimated to cost $60,000 each. Sane programs could put up in a room for 5 years!

Police and Prisons Kept flat

Funding for the California Department of Corrections and Rehabilitation. The governor is proposing $13.6 billion dollars in total funding for CDCR, up from $13.1 billion in January’s proposal.

The budget proposal still includes ending the state’s final contract with private prisons and closing Deuel Vocational Institution in Tracy by September 2021 and California Correctional Center in Susanville, by the end of June 2022.

Outside of CDCR, Newsom proposes spending about $13 million for investigating police use-of-force. There’s also $71.4 million proposed for the care of incarcerated people, which includes mental health and other treatment programs.

Environment and Climate

  1. Wildfire Action. After record-setting fire seasons, which burned more than 4 million acres of California land, Newsom is proposing Cal Fire’s total budget to be about $2.4 billion, a $100 million increase from his January proposal. The proposal includes an additional $38.9 million for staffing more firefighters and California National Guard crews. The proposal also includes sending hundreds of millions of dollars to the state Office of Emergency Services for wildfire response. In total, the budget would spend about $1.2 billion — including a $536 million wildfire package signed earlier this year — to mitigate wildfires.

  2. WATER. Newsom’s May revision proposes $5.1 billion in the coming years to address water supply statewide — including drinking water, waste water and drought mitigation in communities. Newsom recently declared a drought emergency in much of the state.

  3. Agriculture industry support, which represents a large portion of California’s exports and has been hit hard by decreased water supply and dry weather conditions. The budget proposes spending $794 million in upgrades in farming, improved drought resiliency, sustainable pest management and more.

  4. EV subsidies $3.2 billion over the next three years to expand the state’s zero emission vehicle goals. That includes more zero-emission short-haul trucks, transit buses and school buses, as well as charging and fueling infrastructure to adjust to the increase of zero-emission vehicles on the road.

  5. Climate Retrofits. $1.3 billion for communities bearing the brunt of climate change. The money includes funding to address extreme heat, sea level rise, infrastructure investments in disadvantaged communities.


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