Jerry Brown says a recession is inevitable
Jerry Brown is a very wily politician who during his second governorship has also been a very lucky one, as he indirectly acknowledged Thursday.
When Brown returned to the governorship six years ago after a 28-year hiatus, California’s economy was beginning to recover from its worst recession since the Great Depression.
The recovery, coupled with voter approval of a multibillion-dollar tax hike, mostly on the wealthy, allowed Brown to balance the state budget, which had been hemorrhaging red ink, pay down a “wall of debt,” build a “rainy day fund,” and sharply boost politically popular spending on K-12 schools.
Unions persuaded voters to continue the higher taxes, the state’s economy continued to expand, and the wealthy continued to reap taxable gains in the stock market, which allow Brown to ease up a bit on spending in the revised 2017-18 budget he unveiled on Thursday after warning earlier about deficits.
Brown’s second governorship has less than 20 months to go, and with the reserves he’s insisted on amassing as a backup, he can coast into retirement with a high probability of bequeathing his successor a reasonably healthy fiscal condition.
That would be no small feat given the track record of most recent governors, including himself in 1983, of leaving budget messes for those who followed.
Noting that the national economy is overdue for a downturn after a lengthy expansion, Brown told reporters: “Cuts are coming over the next few years, and they will be big.” But, as he implied, the hit is likely to affect the next governor.
One reason the state has a healthy balance sheet – if one does not count many billions of dollars in unfunded liabilities for public employee pensions and retiree health care – is that Brown, in addition to enjoying a gusher of taxes, has also been relatively tight on spending. In particular, he has resisted pressure from fellow Democrats in the Legislature for new health and welfare entitlements.
That continues in the revised budget, even though projected revenues will be a couple of billion dollars higher than the initial budget he released in January, much of which will automatically flow to schools.
Brown is giving ground a little on child care and is cushioning a potential $600 million hit on counties for in-home aid to the infirm but is spurning demands for expanding the earned income tax credit for the working poor and other Democratic spending priorities.
“Over the past four years California has increased spending by billions of dollars for education, health care, child care and other anti-poverty programs,” Brown said. “I don’t think even more spending will be possible. The reason is simple. We have ongoing pressures from Washington and an economic recovery that won’t last forever.”
The question now is whether Democratic legislative leaders will go to the mat with Brown on their priorities during the next month as a final budget is negotiated.
If they do, Brown holds the upper hand. He doesn’t have to face voters again, and leaving the state’s finances in order is clearly one of his legacy goals.