California is in the red due to a severe budget shortfall. The nonpartisan Legislative Analyst’s Office estimates the deficit at $73 billion; Governor Gavin Newsom expressed optimism and put the shortfall at $38 billion. $30 billion shortfall exceeds Bit optimism.
If deficits approach the analyst office’s projections or if any economic slowdown occurs, city and county governments will bear the brunt. Newsom’s budget proposal, which would be revised by the Legislature, would include delays in behavioral health programs and reductions in parks and open space, libraries, child care, education and transportation, all of which would directly impact local governments.
Various housing programs will be “restored” or cut by about $1 billion this year, and $1.7 billion in subsequent years. Political hypocrisy should shock no one. There is no doubt that we are facing a housing crisis, and the state sets a specific number of affordable housing in each city. However, a “reversal” of housing assistance resulted in state governments in each city making demands but withdrawing the required financial assistance.
The state’s fiscal shortfall has negatively impacted cities large and small. I began my career in decision-making roles in City and County government in Los Angeles and now live in Rancho Mirage in the Coachella Valley.
What’s facing Los Angeles Los Angeles Times Called “budget chaos.” The city of nearly 4 million people will have to freeze hiring, cut services and raise fees. San Francisco faces a $245 million deficit this year and a $555 million deficit next year. “We’re in a tough spot,” said Mayor London Breed’s budget director.
The Governor’s proposed budget does not include any raids on local governments. However, the Legislature will explore all options before the June 15 deadline. Cities must anticipate this challenge and be proactive.
Let’s look at my hometown of Rancho Mirage (near Palm Springs), home to 18,000 residents. The Rancho Mirage City Council passed a budget “assuming the local economy will continue to thrive.” Flourish? perhaps.
There’s no doubt local budgets will be squeezed, but let’s protect our priorities:
1) Three Los Angeles City Council members voted against raising pay for the Los Angeles Police Department. For those who call themselves “super progressives,” anything is possible. However, budgets for police, fire and emergency medical technicians should not be reduced. Public safety is the city’s top priority.
2) Infrastructure is never sexy, but it is always critical. The state deficit delayed an $8 million flood control basin grant to Palm Desert under the state’s Regional Early Action Planning (REAP) program. Delaying infrastructure projects is reminiscent of the old “pay now or pay later” TV commercials. Seek cities mobilizing and lobbying their state representatives to protect critical funding to solve today’s problems and minimize tomorrow’s losses.
3) California’s Democratic Legislature, with its supermajority, has never been called pro-business. However, local governments rely on sales revenue and bed/transit occupancy taxes. Stubborn inflation and the dramatic shift to working from home have led to a surge in office vacancies, with the knock-on effect of empty storefronts and retail uses. Local governments should work with the local business community to retain existing businesses while attracting and encouraging new ones.
Despite California’s budget woes, special interest groups continue to push for more funding. Newsom’s proposed budget allocates $22,850 per student, but California Now is urging an additional $23 billion in annual education spending. Look for powerful teachers unions to flex their political muscles.
Newsom’s budget proposal is misleading in two ways.
Budget proposal delays minimum wage increase for health care workers. What’s wrong with this picture when fast-food workers receive state-mandated raises but are not essential health care workers? Whether at Eisenhower Hospital in the Coachella Valley, Cedars-Sinai Hospital in Los Angeles or elsewhere, balancing budgets on the backs of historically underpaid critical workers is counterproductive to the health of every Californian.
Second, the bullet train is a giant vacuum that absorbs public funds. The Governor’s budget allocates $4.2 billion to continue construction of a 120-mile stretch from Madera to northern Bakersfield. Is this the greatest act of stupidity in California history?
California imposes more than enough taxes and regulations. However, state controller Maria Cohen has her sights set on Shohei Ohtani, the baseball prodigy who signed a massive $700 million contract with the Los Angeles Dodgers. Ohtani will defer $680 million in salary to 2034-43. Finance Director Cohen called on the U.S. Congress to force Ohtani to pay taxes in California even if he returns to Japan. California’s tentacles have extended to Tokyo.
You can leave California, but you can never leave.
