Editorials

What effect will Trump have on California?

Gov. Jerry Brown discusses his revised 2016-17 state budget plan earlier this year. It’s unknown how President-elect Donald Trump’s policies may affect California’s economy.
Gov. Jerry Brown discusses his revised 2016-17 state budget plan earlier this year. It’s unknown how President-elect Donald Trump’s policies may affect California’s economy. The Associated Press

California is heading into the new year with an $11.5 billion reserve rainy-day fund, and that’s good because clouds are gathering from Trump Tower.

Some economic prognosticators had been forecasting a slowdown before Donald Trump’s election. Now, as Trump puts together his administration and issues signals that are somewhere between mixed and scary, Gov. Jerry Brown is right to be cautious about the 2017-18 budget his aides are busily writing.

Michael Cohen, Brown’s finance director, noted that revenue projections are down about $1.4 billion since June. While this is not huge, given California’s $170 billion-plus budget, “the outlook for the upcoming budget is concerning,” Cohen said.

Trump is the wild card. His promise to spend heavily on rebuilding roads, bridges and airports would aid California, but perhaps not if it’s funded by deep cuts in health care spending. A federal tax cut he suggests could help, but not if it adds to the long-term deficit.

Many other questions remain: Will Trump end the Affordable Care Act, which California has aggressively implemented, or merely tweak it? Will he tear up the North American Free Trade Agreement, as he promised? If so, will he renegotiate it in ways that would help Central Valley farmers and Silicon Valley entrepreneurs, or set off a trade war? Will he build a wall at the Mexican border and deport millions of undocumented immigrants, which would tear at the fabric of this state and its economy, and leave Valley farmers scrambling for labor?

There was a Trump bump after the election; many stocks rose, but not tech stocks. While they could recover, Apple, Facebook, Google and others could remain in the doldrums until implications of Trump’s policies become clearer. That, too, affects the state.

A legislative analyst’s report shows how heavily California depends on Silicon Valley. Personal income-tax collections account for 70 percent of the revenue for the $120 billion general fund, from which the state funds most programs including education, public colleges, health care and prisons.

The Bay Area’s per capita state income-tax payments are $3,474. That’s nearly double the number for the next highest area, Orange County, where per capita tax payments are $1,821.

The analyst says the state’s budget is on solid footing. Because of the $11.5 billion in reserves, California could weather a recession. But elections matter. And Trump’s impact on California’s fiscal state could be just as jolting as it was on the nation’s politics.

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