TSE – Newsom’s budget proposal skips tough choices – Orange County Register

California’s Legislature returned to session on Monday and will be wrestling with Gov. Gavin Newsom’s newly announced and record-setting $227 billion budget. Lawmakers have until July 1 to approve it, but the governor has asked them to approve a rapid approval of billions of dollars in direct spending to aid local and state agencies, small businesses and individuals.

The good news is that, despite predictions last year that the COVID-19-related shutdowns and recession would decimate the treasury, the state is awash in revenues. Last year, lawmakers passed significant spending rollbacks in anticipation of a $54-billion shortfall. Instead, they are looking at a $15-billion surplus. It’s lower than the $26-billion surplus predicted by the Legislative Analyst’s Office, but still is a rather impressive windfall.

Like most state budgets, this one is a mixed bag. We have little problem with Newsom’s “immediate action plan,” which would immediately spend $5 billion on direct stimulus payments to low-income Californians, provide small-business grants and fee waivers, and earmark $2 billion to school districts. We rarely support direct payments, but state edicts have shuttered businesses, eliminated jobs and imposed new costs on schools.

Nevertheless, Newsom filled his proposal with Christmas-tree ornaments. The most egregious one is $1.5 billion in funds to build electric-vehicle infrastructure, including nearly a half-billion in “incentives” for electric-car purchases. Sadly, the budget ramps up the same old spending train.

On the good side, the governor recognized that “our future is very, very, very tenuous” as he cautioned about LAO predictions of coming $10-billion annual deficits. He tabled plans to expand healthcare assistance for the elderly and illegal immigrants. He resisted calls to seek tax increases. He proposes boosted funding for the university systems – provided there are no tuition increases.

Republicans rightly blasted the budget for lacking a clear reopening blueprint, but Newsom received the most brickbats for his comments about California’s business climate. As top tech businesses flee for more-hospitable climes, the governor pointed to “all the new billionaires” and noted that wealthy Californians are “doing pretty damn well.”

That’s certainly true, but California has an overly punitive regulatory system and excessively high taxes. The wealthiest Californians are doing well, but when they relocate to other states, they take middle- and lower-income jobs with them.

In fact, the state’s boisterous budget surplus highlights the uneven economic consequences of the coronavirus-related economic situation. California has a steeply progressive tax system, whereby the wealthiest Californians pay the lion’s share of income taxes. The budget is in decent shape because the wealthy have done quite well as the stock market has soared.