Two years ago, it was only a slight exaggeration to complain that our state was broke. In fact, some Californians seemed to get perverse pleasure in the remark.
Today, the state's financial picture is much improved, the result of voters approving Proposition 30, of spending cuts and of a rebounding economy. Last week, Gov. Jerry Brown proposed a budget that both Democrats and Republicans generally praised. Imagine that.
True, it is sometimes dangerous when both parties agree. (Remember electricity deregulation?) But there's a fair amount of consensus that California must make education a priority while being prudent about most other spending. Brown's budget does that, even to the disappointment of members of his own party who want the state to invest more in social programs.
Brown has proposed a $97.7 billion general fund budget that increases K-12 school spending from $53.5 billion to $56.2 billion. It also boosts spending for higher education and Medi-Cal, largely because of an expected increase in the number of people seeking the state version of Medicaid as California implements federal health care reform. It proposes a $1 billion reserve.
Yet even if Brown's spending plan is as prudent as it seems, no one at the Capitol should be doing fiscal high-fives. Yes, the state's financial situation is far healthier than when Brown took office, and he deserves credit for that. But the state still has an alarming accumulation of debt that preceded Brown, which the governor and lawmakers haven't fully confronted. Plus, the pilots and passengers of California Flight 2013 would be wise to keep their seat belts buckled. There could be turbulence ahead.
The biggest storm, of course, is the dark cloud known as Congress.
California is highly dependent on federal funding, and continued impasses or sequestration-type spending cuts could affect everything from health care to transportation. Consumers could hold off on spending -- thus reducing sales tax revenue -- because they are now paying a normal payroll tax rate (for Social Security and Medicare). Europe's finances also continue to be volatile, a wild card for the larger economy.
Even if California avoids these storms, it still needs to reckon with debt already on the books, including retirement obligations for state employees. Page 7 of the governor's budget summary contains a chart showing the state with $181 billion in unfunded retirement liabilities, including pension costs and health care obligations. The biggest of these is $64.5 billion for CalSTRS, the teachers retirement system.
Although the budget document notes such challenges, it proposes nothing beyond the status quo to address them.
In his budget letter to the Senate and the Assembly, Brown offers a wise summary: "What must be avoided at all costs is the boom and bust, borrow and spend, of the last decade. Fiscal discipline is not the enemy of democratic governance, but rather its fundamental predicate."
Late last year, questions were swirling about Brown's health and stamina. He's answered those in recent weeks with energetic defenses of his budget and prison plan. He said his treatment for prostate cancer is finished and he intends to be around for a while.
The real test of this governor, and of state lawmakers, is not their words but their performance -- their willingness to complete the job of getting California's fiscal house in order. That is a big task that must include passing a reasonable budget with some reserves, reducing regulatory burdens and creating an environment that encourages businesses to stay and grow in California.