BUSINESSES NEED A VOICE IN
CALIFORNIA’S BUDGET DISCUSSION
by Rob Lapsley
alifornia is now the fifth-largest economy in the world.
As a global leader, we have some of the best minds track-
ing our budget and finances, but there are few third-party
groups that focus on objective analysis of our state’s finances.
In fact, there is currently no independent voice in the state
budget discussion from those who pay for those programs —
California businesses and residents.
Both the California Department of Finance and California
Legislative Analyst do an excellent job of providing informed,
intelligent and, in the case of the Legislative Analyst, impar-
tial analyses on our current financial health. Outside of those
organizations are groups like The California Budget and
Policy Center, which is funded by groups and organizations
that receive, or whose members’ salaries are supported by,
The California Busi-
working to change that.
As a nonpartisan, data-
driven organization, we
are embarking on a new
venture that will add a
business voice to the bud-
get discussion. In 2012,
CBRT launched the Center
for Jobs and the Economy,
a nonprofit organization that provides critical data on key eco-
nomic indicators to track the state’s economic health. Now, in
2019, we want to connect those indicators to the state’s budget
process and educate business leaders on the impact budget
policies have on the taxes they pay, the costs being paid by
their employees and the overall economy.
Currently, there is no consistent variable used to track and
report state revenue. If you want to know a simple question,
such as how much money the state takes in each year, you’ll get
a series of different responses depending on who you ask. The
state budget is segmented in a way that allows different people
to use different numbers when talking about state finances.
This has allowed interest groups to deflate or inflate the state’s
financial picture to fit their needs.
Let’s break down the question of how much money the state
takes in every year. Do you simply count general fund revenue?
Then the answer is $146 billion. Do you also count special fund
dollars? Then the number climbs to $202 billion. But there’s an-
other $105 billion we take in from the federal government in the
form of pass-through dollars. That brings total state revenue to
a whopping $307 billion this year. But there is even more rev-
enue coming in from other sources. The cap-and-trade fund,
which is paid for by businesses to reduce greenhouse gas emis-
sions, currently has $1.5 billion in unspent money. And there is
still a yet-to-be-determined amount of bond funding that the
state will have at its disposal this year.
But even those numbers don’t tell the whole picture. When
looking at the budget, trends are equally important. Since the
end of the Great Recession (FY 2010-11), general fund rev-
enue is up 56 percent. But special fund revenue — fees and
other revenue dedicated to specific programs or services
— is up a whopping 94 percent in that same time. Much of
that increase has come
in the form of higher
fees paid by businesses
and residents, including
increased court fees, ve-
hicle licence fees and AB
32 (Global Warming Solu-
tions Act) administrative
fees. Many of these fees
were passed when the
state was trying to right
the fiscal ship, but none
have been rescinded since we have entered this period of sig-
nificant economic growth.
What’s more, the unspent balance in all special funds is ex-
pected to total $32.8 billion this year, while there is a projected
$19.4 billion in all general fund reserve accounts, including
$15.3 billion in the state’s Rainy Day Fund.
And yet, with all of this new revenue and with projected
continued economic growth, spending is expected to outpace
revenue in just a few short years. In FY 2022-23, the state an-
ticipates a general fund deficit — and that is without any new
major spending proposals passed by the Legislature. Gov.
Gavin Newsom has already outlined an ambitious agenda that
will require tens — if not hundreds — of billions of dollars in
new revenue spending.
The governor is the most important elected official to dis-
cipline spending. During his budget press conference earlier
this year, Newsom prudently proposed modest increases in
ongoing funding, choosing instead to use one-time funding
The Center For Jobs and the economy is working
toward developing a unique, easily consumable
one-stop website where businesses and the public
can get something not available right now — a
better picture of all state finances.
comstocksmag.com | April 2019