After
five straight years of double digit billion dollar budget deficits, it appears
that California is finally getting its fiscal house in order. Yesterday
Governor Brown introduced his fiscal year 2013-14 spending plan to the
Legislature and it is balanced without any new major programmatic cuts. It even
projects a small surplus at the end of 2014. Helped by previous cuts,
realignments and new revenues from Proposition 30 in November 2012, it would
dedicate almost $3 billion in new revenues to K-12 and higher education (both
U.C. and CSU). It also aggressively moves to expand the state’s medical program
for the poor (Medi-Cal) consistent with implementation of the Federal
Affordable Care Act (Obamacare).
However, because Proposition 30 raises most of
its revenue from very high income individuals, it doubles down on a VERY
volatile source of revenue: personal income tax. While Governor Brown has
succeeded in getting additional revenues and balancing the budget, due to the
lack of a spending limit and functional rainy day fund, the boom bust cycles we
have seen in the past are more likely to occur in a post P-30 world than they
were in a pre P-30 world.
