LOS ANGELES — The California Department of Finance disputed a think tank article that questioned the state’s economic strength.
California’s state government collected $2.68 billion less in revenues than expected during the 2016-17 fiscal year, according to the article “California Fiscal Outlook Remains Grim,” from David Schwartzman, a California Policy Center research fellow, published Thursday.
In the article, Schwartzman said that signs point to tough times ahead for California’s budget.
“While California faces a harsh fiscal outlook in the future, the state is making life difficult for its citizens now,” Schwartzman writes in his report for the right-leaning nonprofit. “Taxes make it expensive to live in California.”
According to the Tax Foundation, he wrote, California has the third-worst business tax climate in the U.S.
“This article begins with an fiscal comparison that lacks relevance, given that it’s based on forecasts that are more than a year out of date, and proceeds from there to order a la carte from a menu of selective statistics that ignores California’s substantial economic strengths and its demonstrated fiscal accomplishments,” said H.D. Palmer, a Department of Finance spokesman.
According to Schwartzman, a Legislative Analyst’s Office report estimates the legislature’s decision to extend California’s cap and trade program will raise gas prices by up to 63 cents a gallon by 2021 and up to 73 cents a gallon by 2031.
The article’s assertion that “low net migration numbers are primarily the result of California’s inability to attract immigration” is demonstrably false, Palmer said. For more than 10 years, Palmer said, California has been the number-one destination for immigrants.
California has a $183.2 billion budget for fiscal 2017-19, excluding federal funds, a $12 billion increase over the previous year, Schwartzman wrote.
“This comes despite calls by Governor Jerry Brown to cut spending and an error by his administration that understated California’s deficit by $1.9 billion," he wrote.
Palmer countered with a list of financial improvements made during Brown’s time as governor.
“With a gross economic output of more than $2.6 trillion, California stands as the world’s sixth largest economy,” Palmer said. “And at a time of continuing change and uncertainty, California today is better prepared and better poised to meet its fiscal challenges than at any time in its recent history.”
• Of the original “Wall of Debt” – the $34.7 billion in budgetary borrowing that Brown inherited when he took office in 2011 – approximately $29 billion will be paid off by the end of the current fiscal year.
• In addition to this year’s day-to-day operating reserve of more than $1.4 billion, thanks to the governor’s successful 2014 ballot initiative, California’s separate Budget Stabilization Account stands at $8.5 billion this year and grows to more than $12 billion in just three years. This will provide the state with its highest-ever reserve to help the state navigate the next change in economic fortunes.
• This marks the third year in a row that California hasn’t had to rely on external borrowing for its day-to-day cash management. The state ended the last fiscal year with $37 billion of available unused cash; combined with other available resources, the state’s portion of the investment pool of excess cash stood at nearly $55 billion.
• Building on the state’s pension reforms, at the governor’s insistence this year’s budget makes a $6 billion supplemental payment to the state’s public employee retirement system that will reduce unfunded liabilities, stabilize contribution rates, and save taxpayers $11 billion over the next two decades. Moody’s Investors Service cited it as a “credit positive development because it suggests the state will aggressively counter a projected rise in its unfunded pension liabilities.”