Newsom’s budget sparks concerns

From CalMatters Capitol reporter Alexei Koseff: Newsom’s record-breaking budget proposal was met with some caution on Thursday, when the Legislature’s nonpartisan fiscal advisor warned that his spending plan includes more proposals than districts and departments — many of which are still figuring out how to use funds from last year’s massive surplus — might be able to effectively implement. The Legislative Analyst’s Office suggested that lawmakers instead consider directing more of the surplus into the state’s reserve accounts, which hold more money than ever before but haven’t kept up with the growth in general fund spending — a potential risk in another economic downturn.

Newsom alluded to those concerns on Monday, but said his hands were tied by a 2014 ballot measure that annually directs a portion of taxes into a rainy-day fund until it reaches 10% of general fund revenue. After hitting that limit — as would be the case in this budget — any additional money must be spent on infrastructure.

Newsom: “I know many people believe that our reserves are not as high as they should be. I agree with you. But I hope they also would agree with me that in order to get those reserves where they need to go, we need a constitutional amendment to reform our reserve system.”

But that’s not exactly true. Once the rainy-day fund reaches the 10% cap, the state can still make additional optional deposits in the account. It remains to be seen whether Newsom and lawmakers have any desire to do so — let alone try to change the law to require even higher reserves — when there are so many billions of dollars to hand out.