Brown’s budget quandary
How does California draw up a state budget when Washington Republicans may yank away billions in revenue? That’s the biggest what-if question for Gov. Jerry Brown as he sketches an early season spending plan.
The pledge by Donald Trump and Republican lawmakers to repeal the 6-year-old Affordable Care Act puts California at the financial brink. No state has embraced the federal plan as avidly, with some $16 billion in federal money going to enroll nearly 4 million residents.
Take this money away — as killing the Affordable Care Act would do — and the state budget caves in. Small wonder that state leaders are digging in so publicly to defend Obama-era initiatives that may come undone.
The uncertainty over Washington’s direction is leaving Brown in never-never land. He’s proposing a $122 billion general fund budget — one that keeps state spending at nearly the present level — while he and budget architects in the Legislature await the outcome of Washington’s political brawl. When and if the federal health plan vanishes, it will mean a brand-new budget and major consequences that will spill red ink across the spending picture.
By law, Brown is offering a preliminary budget plan that is finetuned in May before taking effect in July after the Legislature approves it. In normal years, it’s a chance to frame the picture before bargaining begins between the governor and Legislature over a spending plan. But the Washington storm cloud fostered by Republican control of the White House and Congress will be the largest factor in coming months.
In his budget, Brown is playing up his now-customary stinginess. California’s roulette wheel tax system that leans heavily on the wealthy is proving a problem once more, he said. It was churning out money last year with more expected, but tax payments are dipping, possibly because talk of Trump tax cuts is leading asset-rich taxpayers to postpone selling.
If this trend continues, the state could run a nearly $2 billion deficit, the governor said. To avoid that, he’s trimming back an increase in school funds, tabling $400 million in affordable housing aid and postponing repairs to state buildings. But these cuts would be tiny if the Affordable Care Act disappears.
There is some cushioning. The state has $8 billion in a rainy day account. Brown has promoted this savings kitty to blunt wide swings in tax collections, though a thorough rewrite of revenue rules would be better. Also, in November voters approved a tobacco tax and an extension of an extra tax on the wealthy. The timing and impact of federal health care cuts is far from certain with Republicans feuding and no clarity about what might replace the plan.
But for now, California is living in limbo, “riding the tiger” of an unpredictable tax system, as Brown said, and wondering how big a hit federal health care funds will take.