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California’s Budget and Impact to Santa Cruz County Even in the best of California’s economic glory days, no governor has entered office with the kind of fiscal tail wind that Gov. Gavin Newsom did when he was took office in January. He submitted his 2019-20 budget based on past revenue collections and projections in a two hour press event that displayed his wonkiness side. You can review the January budget numbers here: http://www.ebudget.ca.gov/2019-20/pdf/BudgetSummary/EconomicOutlook.pdf Today, the Governor releases the May Revise, California’s coffers are full of taxpayer cash, its reserve accounts are stocked to weather an economic slowdown and there’s general consensus on new help for the state’s youngest and most vulnerable residents. A major political victory would seem all but assured as he prepares to unveil a revised state budget this week. Governor Newsom has a very real challenge: There is more revenue than was projected just five months ago according to recent report. But the quandary for the Governor and the super majority Democrats in the Legislature is to either curb spending or increase funds to specific projects, programs and other assortment of ideas where the “extra cash” can be doled out. Last week I attended a regional economic summit hosted by the Monterey Bay Economic Partnership (MBEP). The Governor’s Director of Economic Development, Lennie Mendonca was one of the keynote speakers leading a panel talk on the state of our region. He took time to share a comment that the Governor had with the Los Angeles Times Editorial Board the previous week. The Board asked (Governor Newsom) how he compared himself to the stingy Gov. Jerry Brown. Mendonca said the Governor responded — Jerry was conservation and I am boldly more conservative. As we ready ourselves for the formal May Revise on Friday, how Newsom responds to the Legislature or pushes back could set the tone for his entire term in office. Decisions by the Governor and the Legislature are about who wants to use their political capital, and when. Newsom’s initial proposal assumed that tax collections would continue to outpace projections. It projected, by next summer, a $21.6-billion windfall — which doesn't include unexpected cash that would be diverted into the state’s rainy-day reserve fund. April’s preliminary tax data suggests even those rosy predictions were too modest. Corporate tax revenue ended the month $800 million above Newsom’s estimate. Personal income tax revenue beat predictions by some $200 million last month — suggesting Newsom’s initial budget might have undercounted California’s surplus cash by almost $1 billion. For months, the governor has insisted that unexpected revenue should largely be spent in one-time increments and not be automatically built into future budgets. “We want to maintain that fiscal discipline,” he said last month in a meeting with The Times’ editorial board. What is in store for Santa Cruz County all depends on how the one time monies are parceled out. In usual budget fashion there are specific set asides where the cities and counties react to the potential availability of funds from the state to local programs. Yet, those funds are based on ‘competitive’ process to direct them here. Are we competitive? At the city level this week, the Santa Cruz City staff is discussing the City’s annual budget where we are projecting a $3.2 million deficit in the city’s general funds — the area where the city council has more discretion on where those funds are spent. Here is the link to the City Manager Martin Bernal’s message to the community: http://www.cityofsantacruz.com/home/showdocument?id=75824\ The bottom line is the ‘proceed with caution’ summary of his message. “Our Fiscal Sustainability Plan calls for continued strategies to increase revenues, reduce expenditures, and implement best management fiscal practices and policies. Unfortunately, our most recent modeling, based upon the latest information on cost commitments and risk factors, points to a larger General Fund deficit for the coming budget year of $3.1 to 3.2 million and potentially greater depending on upcoming decisions affecting revenues and expenditures. To maintain a balanced budget, the FY 2020 Budget must be adopted with changes to address this deficit.” The City staff is making specific recommendations to reduce projects and programs department by department to close this deficit at Wednesday City Council deliberation. Here is a budget summary http://www.cityofsantacruz.com/home/showdocument?id=75826 While California’s revenue coffers are full to the brim, the city should continue to find creative ways to provide city services without jeopardizing the business’s investment in our community.
California’s Budget and Impact to Santa Cruz County
Even in the best of California’s economic glory days, no governor has entered office with the kind of fiscal tail wind that Gov. Gavin Newsom did when he was took office in January. He submitted his 2019-20 budget based on past revenue collections and projections in a two hour press event that displayed his wonkiness side.
You can review the January budget numbers here:
http://www.ebudget.ca.gov/2019-20/pdf/BudgetSummary/EconomicOutlook.pdf
Today, the Governor releases the May Revise, California’s coffers are full of taxpayer cash, its reserve accounts are stocked to weather an economic slowdown and there’s general consensus on new help for the state’s youngest and most vulnerable residents. A major political victory would seem all but assured as he prepares to unveil a revised state budget this week.
Governor Newsom has a very real challenge: There is more revenue than was projected just five months ago according to recent report. But the quandary for the Governor and the super majority Democrats in the Legislature is to either curb spending or increase funds to specific projects, programs and other assortment of ideas where the “extra cash” can be doled out.
Last week I attended a regional economic summit hosted by the Monterey Bay Economic Partnership (MBEP). The Governor’s Director of Economic Development, Lennie Mendonca was one of the keynote speakers leading a panel talk on the state of our region. He took time to share a comment that the Governor had with the Los Angeles Times Editorial Board the previous week. The Board asked (Governor Newsom) how he compared himself to the stingy Gov. Jerry Brown. Mendonca said the Governor responded — Jerry was conservation and I am boldly more conservative.
As we ready ourselves for the formal May Revise on Friday, how Newsom responds to the Legislature or pushes back could set the tone for his entire term in office. Decisions by the Governor and the Legislature are about who wants to use their political capital, and when.
Newsom’s initial proposal assumed that tax collections would continue to outpace projections. It projected, by next summer, a $21.6-billion windfall — which doesn't include unexpected cash that would be diverted into the state’s rainy-day reserve fund.
April’s preliminary tax data suggests even those rosy predictions were too modest. Corporate tax revenue ended the month $800 million above Newsom’s estimate. Personal income tax revenue beat predictions by some $200 million last month — suggesting Newsom’s initial budget might have undercounted California’s surplus cash by almost $1 billion.
For months, the governor has insisted that unexpected revenue should largely be spent in one-time increments and not be automatically built into future budgets. “We want to maintain that fiscal discipline,” he said last month in a meeting with The Times’ editorial board.
What is in store for Santa Cruz County all depends on how the one time monies are parceled out. In usual budget fashion there are specific set asides where the cities and counties react to the potential availability of funds from the state to local programs. Yet, those funds are based on ‘competitive’ process to direct them here. Are we competitive?
At the city level this week, the Santa Cruz City staff is discussing the City’s annual budget where we are projecting a $3.2 million deficit in the city’s general funds — the area where the city council has more discretion on where those funds are spent. Here is the link to the City Manager Martin Bernal’s message to the community: http://www.cityofsantacruz.com/home/showdocument?id=75824\
The bottom line is the ‘proceed with caution’ summary of his message. “Our Fiscal Sustainability Plan calls for continued strategies to increase revenues, reduce expenditures, and implement best management fiscal practices and policies. Unfortunately, our most recent modeling, based upon the latest information on cost commitments and risk factors, points to a larger General Fund deficit for the coming budget year of $3.1 to 3.2 million and potentially greater depending on upcoming decisions affecting revenues and expenditures. To maintain a balanced budget, the FY 2020 Budget must be adopted with changes to address this deficit.”
The City staff is making specific recommendations to reduce projects and programs department by department to close this deficit at Wednesday City Council deliberation. Here is a budget summary http://www.cityofsantacruz.com/home/showdocument?id=75826
While California’s revenue coffers are full to the brim, the city should continue to find creative ways to provide city services without jeopardizing the business’s investment in our community.