California Governor Jerry Brown recently held a press conference to discuss his latest proposed budget.
Brown was Friday’s KVML “Newsmaker of the Day”.
During the State of the State Address, Brown said, “Since the Second World War, we have experienced 10 recessions, none of them expected or accurately predicted. Economists are unable to pinpoint when a recession will begin or how long it will last. Historically, California budgets have been built around forecasts that assume uninterrupted growth. Just looking at the last two recessions, we notice that ongoing state spending accelerated right into the downturn.
That is why if you add up the deficits and surpluses between 2000 and 2016, you find that the total deficits were seven times as large as the surpluses, resulting in painful and unplanned-for cuts. Schools, child care, courts, social services and other vital state programs were deeply affected. So too were our universities which had to reduce classes and double tuition.
I don’t want to make those mistakes again.
According to economists at the Department of Finance, the next recession, even if it were only of average intensity, would cut our revenues by $55 billion over three years. That is why it is imperative to build up the Rainy Day Fund – which was recently overwhelmingly approved by the voters – and invest our temporary surpluses in badly needed infrastructure or in other ways that will not lock in future spending.
We must also be realistic about our current tax system. California has a very progressive but volatile income tax that provides 70 percent of General Fund revenues. If we are to minimize the zigzag of spend-cut-spend that this tax system inevitably produces, we must build a very large reserve.
We also know that inequality has risen sharply in recent decades. We have seen the disappearance of many middle class jobs and the growing share of income taken by the top 1 percent and even more so by the top .01 percent. In fact, the proportion of income earned by the 1 percent has almost tripled. This contrasts sharply with the virtual stagnation in the wages of so many ordinary Americans. And CEO pay has risen from 22 times the average worker pay to 352 times.
Such inequality is reinforced by national regulatory and tax policies and driven by globalization and the relentless influx of cheaper goods and outsourcing of higher-paying jobs. Technological change also plays its part through sophisticated software, robotics and global communication. Of course this creates jobs, keeps inflation low and makes available phenomenal amounts of information and undreamed of conveniences. But it also makes for higher pay at the top and a huge number of low-paying service jobs below.
Another long-term obligation we have to face is our deteriorating infrastructure. From state office buildings here in Sacramento to levees and facilities in our parks, universities, prisons and state hospitals – serious deficiencies abound. In this year’s budget, I am proposing that we use $2 billion of our temporary surplus on one-time investments to repair and replace aging structures. Neglecting what we have built over many years and letting it further deteriorate makes no sense and will just pile up costs in the long run.
But that is not all. Our overall state deferred maintenance is staggering, estimated to total $77 billion. Most of that is in our roads, highways and bridges. Here is our challenge: We have no choice but to maintain our transportation infrastructure. Yet, doing so without an expanded and permanent revenue source is impossible. That means at some point, sooner rather than later, we have to bite the bullet and enact new fees and taxes for this purpose. Ideology and politics stand in the way, but one way or another the roads must be fixed.
Achieving balance between all the conflicting interests is not easy but I pledge to you that I will listen and work patiently to achieve results that will stand the test of time. Water goes to the heart of what California is and what it has been over centuries.”
The “Newsmaker of the Day” is heard every weekday morning on AM 1450 KVML at 6:45, 7:45 and 8:45 AM.