No California governor in modern times has entered office with more wind at his back and fewer obstacles lying ahead.
“These are good times,” newly inaugurated Gov. Gavin Newsom said in rolling out his $209-billion budget proposal last week. “You pinch yourself at times like this.”
Newsom has loads of money to spend and no effective political opposition. His Democratic Party wields unprecedented power in Sacramento.
Going back 60 years, Govs. Pat Brown, Ronald Reagan, George Deukmejian, Pete Wilson and Arnold Schwarzenegger all inherited troublesome budget deficits. Brown, Reagan and Wilson were forced to impose hefty tax hikes. That didn’t sit well with voters who had just elected them. Schwarzenegger should have raised taxes, but instead borrowed excessively.
Gov. Gray Davis seemed in hog heaven in 1999 and started spending like it.
“Folks thought the honey was going to be flowing for the foreseeable future,” recalls H.D. Palmer, who now is working for his fourth governor as chief budget spokesman.
Davis soon became trapped in an energy crisis created by Texas power pirates cashing in on a foolish electricity deregulation scheme he inherited. Then a recession hit and the Democrat was recalled.
In 1975, new Gov. Jerry Brown was gifted by Reagan with a huge surplus that state Treasurer Jesse M. Unruh called “obscene.” Brown and the Legislature should have spent the money on property tax relief. But they dawdled, helping create the climate for Proposition 13, which drastically cut property taxes and forever screwed up state and local government financing.
Brown was punished when he returned to the governor’s office in 2011. He had to clean up $27 billion in red ink created by the Great Recession. He cut programs, spent cautiously and raised taxes while the national economy rebounded. And he left Newsom with a surprisingly huge budget surplus: $21.5 billion.
Eyes popped when Newsom announced that figure at the budget rollout. That’s on top of a $15.3-billion “rainy day” reserve.
A brimming bank account is just one of Newsom’s assets.
He’s telegenic and charming. And so are his wife, documentary film producer Jennifer Siebel Newsom, and their four young children. It’s a family with natural voter appeal.
Newsom also has lots of political allies in the Capitol. Democrats hold three-fourths majority control of each legislative house. Only two-thirds are needed to pass tax hikes and other major bills.
Moreover, the governor is in sync politically with the liberal-leaning Legislature, although he’s cautioning against wildspending with the next recession inevitably looming.
“Heads are moving up and down watching the gyrations of the financial market,” Palmer says. “There are risks out there. Even small fluctuations in the financial market can cause huge swings — good or bad — in state revenue.”
That’s because state government has a sick, unstable tax system. It relies too heavily on rich people’s volatile incomes that can quickly boom or bust.
Asked about it at his budget announcement, Newsom said he hopes “to bring parties together” in the next two years to negotiate “a more comprehensive tax policy” that can be placed on the 2020 ballot. He noted that “many other states tax more broadly.”
But right now, Newsom and the state are benefiting from the roller-coaster tax system. He seemed like Santa Claus handing out gifts to everyone at the budget show.
There was more money for public schools and universities, kindergarten and pre-kindergarten, tuition-free community college, healthcare expansion, welfare boosts, affordable housing, homeless shelters, paid family leave, earned income tax credits for the working poor, wildfire prevention and firefighting. And much more.
All of it will be picked apart and reassembled by the Legislature’s budget committees, and revised by the governor in May.
Newsom emphasized that he was concentrating surplus money on one-time spending that wouldn’t lock the state into expanded costly programs when — not if — a recession hits.
He also wisely proposed socking away surplus revenue in reserves and paying down debt.
He earmarked an extra $4.8 billion for unfunded public pension liabilities — a pittance, however, compared to frightening future obligations that range from $330 billion to $1 trillion, depending on how they’re calculated, for state and local systems combined. Nothing was said about trimming retirement benefits.
Neither did the governor say much about the embattled $77-billion bullet train and $17-billion Delta twin water tunnels he inherited from Brown.
Newsom said he’d have some news about the train soon.
“I’m going to be more realistic about what it is and what it isn’t,” he said, adding: “I’m concerned about the twin tunnels, but I’m committed to [new water] conveyance. I’m committed to looking at it with a fresh set of eyes.”
Newsom exhibited a gubernatorial style more reminiscent of Schwarzenegger than Brown. As the action actor did, Newsom chose the large auditorium in the secretary of state’s building rather than the governor’s press conference room for the budget unveiling. The cavernous auditorium could hold applauding aides, legislators and labor allies.
But Newsom’s performance was unique and impressive. Rather than a customary 30-minute recitation of talking points, the new governor held forth for 1 hour and 45 minutes, displaying a wonky grasp of complex details. It was generally upbeat, unlike the “get off my lawn” scoldings of Brown.
“I love this stuff,” Newsom said at one point.
He’d better. With all he has going for him, there’d be little excuse for failure.
But it was an excellent Week One.
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