The COVID-19 recession has put the ambitious plans of Gov. Gavin Newsom and legislators in the deep freeze, probably for years.
If one can muster sympathy for politicians, the Democrats who dominate California’s Capitol might be worthy recipients.
As the year began, the political and economic stars seemed to be in perfect alignment for them and their sycophantic allies, such as unions and advocates of health insurance for undocumented immigrants, expanding early childhood care and pre-school education, reducing homelessness, more generous social welfare benefits, and lower-cost college education.
The state’s economy was booming, generating many extra billions of dollars in tax revenues and Jerry Brown, who had been something of a skinflint as governor, had been succeeded by Gavin Newsom, who had ambitious plans to expand state-financed benefits.
Brown had ended his two-part, 16-year governorship with a semi-serious warning about California facing “darkness, decline, uncertainty and recession” in the years ahead. But Newsom, with an obvious yen for national political standing, assumed that California’s economic boom would continue indefinitely. He proposed a 2020-21 budget that was a cornucopia of new and expanded programs to confront poverty, homelessness and other social ills.
“California is stronger than ever today, and the budget found in the pages ahead reflects our fortitude,” Newsom wrote as he unveiled the $222 billion budget. “Our state has provided the rocket fuel for the nation’s economic expansion. We are the world’s capital of innovation. We have more people with access to health care and higher education than any other state. California is showing the nation and the world what big-hearted, effective governance looks like.”
Within two months, however, as California began to feel the impacts of the COVID-19 pandemic, Newsom had declared an emergency, ordered a shutdown of much of the state’s $3.1 trillion economy and tossed his proposed budget in the wastebasket, seeing a $54 billion deficit over three years.
He’s now slashed billions of dollars in spending in a much-revised budget — including nearly all of the enhancements he had proposed — and he is begging Congress and President Donald Trump for relief.
Those adversely affected by the revised budget are pleading with their friends in the Legislature to modify the spending cuts, resulting in hours of criticism during an extraordinary “committee of the whole” session of the state Assembly last week.
However, as they express sympathy, lawmakers have little choice unless they can muster two-thirds votes for massive new taxes of some kind.
The most important aspect of the situation, however, is that the severe recession, which has erased several million jobs, is likely to continue beyond 2020-21. In fact, Newsom’s revised budget sees the impact lasting at least through his first term.
“Personal income is not expected to return to 2019 levels until 2023,” the budget says. “In comparison, personal income fell by 3.3% during the Great Recession and recovered to 2007 levels by 2011. The forecast projects the impacts of the pandemic on personal income and its components to be larger in magnitude and in percentages compared to the Great Recession.”
State revenue will follow the same lackluster pattern, Newsom projects. “Total general fund revenues from (income, sales and corporate taxes) are expected to drop from $139.4 billion in 2018-19 to a low point of $114 billion in 2020-21. By 2023-24, it will only have grown to $128 billion,” his budget says.
With budget deficits projected for years to come, the expansive agenda Newsom and legislators desire will likely be stymied at least until mid-decade. They must tell their friends “no” now and for the foreseeable future — a very different scenario than what they had envisioned just weeks ago.