Nobody would have been surprised if Governor Newsom had presented his new state budget wearing a neck brace. The whiplash from budget boom to bust to recovery must have been intense.
One year ago, while the country, and especially California, were flying high economically, the Governor presented a $222 billion budget with an $18 billion surplus. Three months later, the pandemic-fueled recession caused unemployment in California to quadruple, and retail sales cratered. The Governor and Legislature predicted a $54 billion budget deficit and raised taxes, cut spending and borrowed from the future to cover the fiscal hole.
But the Pandemic Recession has been unlike any other economic downturn experienced in the modern era. The economic pain has been real, but it has hit hardest workers in hospitality, tourism and other public-facing businesses. Low-wage and often low-skilled workers in these industries, along with small business owners statewide, have been devastated. The social and community devastation has ravaged these communities and continues to this day. But not the state budget.
Much of the California economy has been spared because it was able to accommodate to the pandemic’s cruel dichotomy: if your business or job is not dependent on bringing people together, you were likely to remain in business or employed. Millions of Californians changed their place of work to their kitchen table, or continued on the job masked, separated and vigilant.
The California investment economy thrived. A buoyant stock market and surprisingly strong real estate market created capital gains revenues double the amount forecast in 2020.
As a consequence, rather than managing a $54 billion deficit, the Governor is proposing a $227 billion balanced budget with no new tax increases and $34 billion in reserves and surpluses, which provides record levels of public school funds, increases spending on higher education without any tuition increases, and expands the social safety net.
Meanwhile, for those whose jobs are “dependent on bringing people together,” Californians Are Revolting Against The Lockdown: