Halfway through the 2015-16 fiscal year, state finances are continuing to improve with billions of extra revenue dollars.
Ordinarily, that would be good news.
However, as the Legislature returns to Sacramento this week after a nearly four-month hiatus, the windfall of taxes – mostly income taxes – looms as a political flashpoint.
Democrats want to spend it – mostly on health, welfare and education services – but Gov. Jerry Brown, who will release his initial 2016-17 budget this week, is clearly reluctant.
“We have to learn from history and not keep repeating our mistakes,” Brown said last May as he unveiled a revised 2015-16 budget. “While there are few signs of immediate contraction, another recession is on the way. We just don’t know when.”
Monday’s steep plunge in global equities markets underscored his hesitance.
Democratic leaders are already beating the drums for more spending, pointing to Legislative Analyst Mac Taylor’s estimate that the state will have $3.6 billion more this year than assumed.
The Assembly’s incoming speaker, Anthony Rendon, wants a heavy state commitment to expand pre-kindergarten education, a longtime goal of children’s advocates, who contend that it will improve academic achievement.
“It’s something I think there’s already support for and something, from a leadership perspective, I’m going to make sure is on the top of the agenda,” Rendon told The Sacramento Bee. “Our leadership team, through the budget process and in terms of prioritizing bills that go to the governor’s desk, we’ll have a fair amount of power to do something about this.”
Brown, however, has pointedly rejected expansion, worrying aloud about new entitlement spending that could not be sustained in another downturn.
On Monday, even before the Legislature reconvened, Senate President Pro Tem Kevin de León staged a news conference in Los Angeles, which he described as “the nation’s homeless capital,” to push for a major new state commitment to build housing for the poor and increase their support payments.
“It’s a sad reminder of the stratified society we live in,” de León said.
Many other spending proposals are being floated, but the complications of having billions of extra dollars go beyond conflicts between Democrat Brown and his co-partisans.
The windfall also makes it more difficult for Brown to persuade Republicans to raise taxes by at least $1 billion to prop up the state’s Medi-Cal program for the poor and by untold billions more for upgrades to the state’s highway system.
The GOP picked up a few seats in both legislative houses in the 2014 elections, thus erasing the “supermajorities” that Democrats had won in 2012. It means that at least a few Republicans would have to vote for any new taxes, and so far they’ve been unwilling.
However, Republicans also want something tangible – more money for the developmentally disabled, a longstanding party priority. That, in theory at least, could be the pivot point for a bipartisan deal.