Capitol Alert

Gavin Newsom has big, liberal plans for California. So how would he pay for them?

Lt. Gov. Gavin Newsom is promising an ambitious agenda for California in his campaign for governor: universal preschool and child care. Health care for all. More money for higher education and job training. More spending on roads, public transit and bridges. Millions of new housing units.

“The time for timidity is over,” Newsom said at a prime-time speech at the California Democratic Party convention in February. “California has never succeeded by playing it safe.”

All of it would be expensive. But Newsom isn’t saying exactly how he’d pay for his ideas.

“I have bold ideas. I want to be audacious in terms of the goals,” Newsom said. “But I’m not reckless.”

He hasn’t released formal, vetted policy proposals. But estimates by independent analysts, and Newsom’s campaign itself, indicate just how costly his philosophical direction could be if he becomes the state’s next chief executive.

Universal preschool and child care: up to $8 billion per year.

Taxpayer-financed, single-payer health care: $400 billion per year.

And building the 3.5 million housing units Newsom has called for by 2025, to address the state’s severe housing shortage and affordability crisis, would only be possible with a hefty state investment, housing experts say.

Newsom also wants to tackle homelessness in a way that has never been done — with an aggressive statewide approach.

“You’ve got to throw money at this problem, or there’s not going to be a solution,” said Randy Shaw, a San Francisco expert on housing and homelessness. “It’s as simple as that.”

Newsom acknowledges the high costs of his goals. “I am not naive,” he said on his campaign bus before the primary. He often repeats the line, “It’s not just about more resources. It’s about resourcefulness ... It’s not just about more money.”

Some of his ideas would require higher taxes and state spending — single-payer health care, for example.

Others could be funded with private sector investment and new programs drawing on federal and local monies, he said.

On homelessness, for example, California could help those on the streets by signing them up for federal disability, which would also offset some state expenses. He says the Silicon Valley’s booming tech sector must play a role in addressing the state’s housing affordability crisis. And the state could restructure housing programs and better leverage federal tax credits to spur more local construction.

“There’s a lot of money being spent in those areas ... It’s not always being best spent,” Newsom said on the campaign bus. “For me, it’s not just ‘either-or’ of a cut or a tax strategy.”

He said he’d spearhead a broad “growth agenda” centered on economic development and job creation.

Newsom has made explicit promises to the public that have helped him court liberal and Democratic voters, and powerful union groups, including the California Nurses Association and the California Teachers Association. Those could be complicated by increasing costs to the state to deal with California’s worsening wildfires, the rising costs of health care for low-income people and growing public pension costs.

Newsom said “you’ve got my word” that he’d boost state spending on colleges and universities, according to the education publication EdSource. “We need to significantly invest more resources into our state institutions of higher learning,” he said later, in a May debate.

On universal, single-payer health care, Newsom told a friendly crowd at the Democratic convention: “My opponents, they call it snake oil. I call it single-payer. It’s about access, it’s about affordability — it’s about time, Democrats.”

He said on the campaign bus in late May that universal preschool is a “developmental necessity. We can’t afford not to do it.”

The pledges, political strategists say, have set great expectations for Newsom, should he be elected. They have also sparked concern by experts on the California economy.

“I’m sympathetic to all the policy goals that Gavin Newsom has, but my concern is that having the governor and Legislature build in a lot of expensive services to the budget will throw the state into another severe deficit the next time there’s an economic downturn,” said Juliet Ann Musso, a professor in the University of Southern California’s Sol Price School of Public Policy, who specializes in fiscal management and political behavior.

“It’s easy to talk about lofty policy aims when we have a surplus, but surpluses don’t last in the state of California,” Musso said. “We have a volatile tax system and business cycle ... When you start talking about adding up all those state programs, I think that would quickly eat up the budget surplus and once we experience a downturn, we’d have problems.”

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Gov. Jerry Brown has warned that a recession is on the horizon, but Newsom argues that California’s budget will continue to grow as the economy grows.

“I really do think Governor Brown has created a new norm of expectation in terms of fiscal discipline, and it’s incumbent upon the next governor, I think, to model that behavior,” Newsom said. “At the same time, he’s been very stubborn in two areas where I’m going to be a little more indulgent: higher education and workforce development, and early childhood education.”

On other initiatives, such as universal health care and addressing homelessness, he said he’d start with a master plan rather than commit significant upfront resources.

“I think what’s been missing for some time are goals and expectations,” Newsom said. “We can set expectations and then we can start backfilling those.”

He said his tenure as mayor of San Francisco, in which he faced a crippling recession in his second term, shows he can advance new programs even in an economic downturn.

Under his watch, San Francisco created a city-funded universal preschool system, adopted the nation’s first universal health care program for all its residents, including undocumented immigrants, and used city funds to rebuild run-down housing in low-income neighborhoods. While those programs continued through the recession, Newsom initiated them before the worst of it hit.

Taxpayers picked up the bill for the universal preschool program, paid for with general fund revenue. To implement Healthy San Francisco, the city added a restaurant surcharge to patrons’ food and dining bills. Newsom and San Francisco’s Board of Supervisors launched the housing program, called Hope SF, in 2006 with $95 million in local revenue bonds. It has continued with investment from federal, state and private sources.

Newsom spearheaded a homelessness housing program, also during the recession, and paid for it by collecting their welfare payments.

While he failed in some cases — he tried unsuccessfully to create free citywide Wi-Fi, for example — he was successful in others. During the recession, in 2010, Newsom rolled out a program that created city-funded savings accounts for kindergarten students, beginning with $50 to $100 deposits. Taxpayers picked up the bill. He argued at the time that the costs were minor and the program was the right thing to do.

“One of the things people will get to know when they know Gavin is he knows how to get creative,” said Peter Ragone, Newsom’s former press secretary and former adviser to New York City Mayor Bill de Blasio. “Money is not an excuse for lack of progress.”

Today, in a comfortable lead in fundraising and public opinion polls, he has begun to suggest that single-payer health care might not be possible.

“We’ve got to address these hard questions, and it requires a lot of consensus building and support from folks that are not natural allies,” Newsom said. “It’s a process that will unfold over the course of time, and I’m committed to pursing it and seeing how far we can go with it.”

Newsom has also suggested that California could afford a universal, single-payer system, saying the state “already spends” about $400 billion on health care. But, he noted, the state would need overcome significant hurdles, including securing multiple waivers from the Trump administration to retain its share of federal health care dollars and asking voters to change the state constitution.

To cover the costs of a universal, single-payer system, California would also have to raise taxes. The levies could replace insurance premiums and other consumer health care costs.

Newsom said he’d work with groups opposed to single-payer, including the California Medical Association, and those in support, including the teachers and nurses.

Bill Whalen, a Republican and research fellow at the Hoover Institution, said Newsom could be faced with the harsh reality that the state’s finances may not allow him to do everything he wants. He could face political blowback if he doesn’t follow through on his campaign promises, he said.

“This is a candidate who is talking about progressive ideas and expanded government, at the same time trying to foster economic growth,” Whalen said. “These are not necessarily compatible concepts.

“The first problem is going to be single-payer, because the California Nurses Association expects it,” he said. “If they don’t see a Governor Newsom doing what he can to get single-payer, they will remind him in very public and very noisy ways.”

Garry South, a Democratic strategist, said however, Newsom’s campaign talk on issues shouldn’t be taken as formal policy proposals. It is aimed, partly, at motivating Democratic and independent voters to turn out in November, when Democratic candidates are seeking to unseat 10 of California’s 14 House Republicans.

“Newsom understands that turnout is driven by the top of the ticket, and every single issue that Gavin Newsom is talking about resonates with the Democratic Party base,” South said.

“There’s a difference between campaigning and governing,” he said. “What you’re trying to do in the course of a campaign is lay out your vision for the state.”

But, South said, Newsom will need to “move quickly” on his chief issue: health care.

“He has promised to be the health care governor,” South said. “The newly sworn in governor needs to fairly quickly move a package dealing with his signature issue, or it looks like his campaign pledge is an empty promise.”

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