Back in the late 70’s, under then-Governor Jerry Brown, the State of California ran a healthy budget surplus. So healthy in fact that Howard Jarvis, in launching the Proposition 13 initiative, called the $ 6 billion State surplus obscene.
Jarvis’ call for a roll back of residential property taxes resonated with the public who bought into a couple of themes. The first was that the voters could vote themselves a property tax cut and future limitations. The second was that a state with a multi-billion dollar surplus is doing something wrong. The voters approved Jarvis’ Proposition 13 property tax reduction initiative in 1978 that not only wiped out the State surplus, it placed funding constraints on state and local government (including school districts) going forward.
Fast forward to 2013. The same Governor, now a 70 plus year old, finds the State is again building a surplus. On Sunday, November 24, the Sacramento Bee newspaper editorialized under the headline “Jerry Brown – legislators should not let surplus burn holes in their pockets.” In that editorial the Bee reports that the State Legislative Analyst forecasts a $5.6 billion state surplus by the end of next year, and recommends the Legislature sock away $ 1.9 billion per year in order to build up an $8.9 billion reserve by 2016.
Brown, in urging legislators to not attempt to spend it all on new or restored programs points out that the State has a wall of debt that needs to be addressed, including the much publicized State pension obligations. Plus, there will inevitably be another economic downturn that will throttle down State revenue again, he cautions.
Holy cow! A Governor that is sounding like a manager with a multi-year perspective. And at least some major media outlets, including the Sacramento Bee, are supporting him. Couple that with the Proposition 30 voter approved tax increase of 2012 and a recovering economy that is generating increased revenue into state coffers, and things are looking up.
But, be on guard. Many special interests, including elected legislators that like to hand out public money like candy in order to generate voter support will be trying to get their hands on that surplus. Maybe even another Howard Jarvis is out there that will decry the development of a multi-billion dollar State surplus as obscene, and try to launch a movement to grant tax breaks to certain groups of citizens again.
Actually, there is a tax reduction already on the books. The voter approved Proposition 30 State Tax hike that approved a sales tax and high earner income tax increases will be expiring – the sales tax increase expires at the end of 2016 and the high earner income tax increase expires at the end of 2018. So the shot in the arm that those tax increases seem to have helped produce is slated to end.
Hopefully the voters have learned a lesson – instant financial gratification can lead to longer term financial crisis. We have been whip-sawed enough in the past decades. Let’s support Governor Brown’s call for fiscal prudence and restraint. And, maybe worry a little about what the impact of the ending of the 2012 Proposition 30 tax increases will be.