In January, Gov. Gavin Newsom presented a proposed budget for fiscal year 2020-2021 which envisioned a several billion dollar increase in spending for existing programs as well as a host of new programs. But that was before COVID-19 arrived at our shores.
In over the course of just three weeks in March, it became obvious that the original budget plan would have to be scrapped because of the most rapid economic downturn America has ever seen.
So it was with great interest that all those who follow California politics were watching last Thursday as Newsom released the “May RevisionRevise” of the budget. To no one’s surprise, the huge dive in state revenues forced the governor to slash $19 billion from January’s initial plan.
According to the governor’s Department of Finance, the budget deficit is $54 billion. But this figure may be overstated in order to present to the public the worst possible case. The non-partisan Legislative Analyst projected the deficit to be as low as $18 billion with a worst case scenario of $31 billion.
It was a positive sign that Newsom also acknowledged that spending cuts have to be a part of the solution, saying that Californians deserve a leaner government, reductions in overhead expenses such as government cars and travel, and reform to agencies including the Department of Motor Vehicles. He also proposed a 10 percent “contribution” from state workers in the form of salary reductions.
However, what appeared to be a glimmer of hope for taxpayers may be swallowed up by the serious flaws in Newsom’s revised budget, the biggest of which is the belief that the proposal by Speaker Nancy Pelosi reflecting a $3 trillion recovery package will provide California with nearly as much money as it wants. The state budget should reflect reality. Pelosi’s bill will face a buzz saw in the U.S. Senate. That is not to say that no additional money for state and local governments will be forthcoming from Congress, but there is little chance it will be on the scale that represents a significant percentage of California’s shortfall.
For that reason, the governor and the Legislature must be prepared to make even more substantial reductions in state spending. A return to previous spending levels may be necessary. The fact is, California’s budget has grown much faster than population and inflation in the last decade.
The fastest way to close the shortfall would be with a rapid recovery in the California economy. Broad-based regulatory reform, delaying the minimum wage increase and tort reform could go far to incentivize the private sector.
On the other hand, nothing would encumber economic recovery more than tax hikes. Regrettably, Newsom didn’t rule out more tax increases, and even more troubling was his evasive answer when asked about the “split roll” property tax hike slated for the November ballot. This attack on Proposition 13 would provide yet another incentive for businesses to pick up stakes and move to other states.
TAXPAYER RED ALERT: NO ON SCA 2 – PROTECT PARENT-CHILD
TRANSFERS FROM HUGE TAX HIKES
Your help is needed immediately to stop a dangerous proposal from advancing in the State Senate and in the State Assembly this week.
Senate Constitutional Amendment 2 (SCA 2) has been misleadingly named, “The Home Protection for Seniors, Severely Disabled, Families, and Victims of Wildfire or Natural Disasters Act.”
If the name was truthful it would be called the “Repeals Prop. 58 and Raises Taxes on Property Transferred Between Parents And Children Act.” Proposition 58 was approved by voters in 1986 with 75.7% of the vote. It provided for certain property transferred between parents and children to be excluded from reassessment. This allowed parents and children to transfer ownership of a home and up to $1 million of assessed value of other property, such as a business, rental home or small apartment building, without an increase in property taxes.
SCA 2 Would Abolish Proposition 58. All property transferred between parents and children would be reassessed to market value, with the sole exception of a home that becomes the principal residence of the person to whom it is transferred. And even that exclusion is capped. In many areas of California, typical family homes are already above the cap in value.
SCA 2 Would Abolish Proposition 193. Property transferred between grandparents and grandchildren is similarly protected from reassessment if the children’s parents are deceased. SCA 2 would repeal this important protection for families that have suffered a loss.
This proposed constitutional amendment is similar to an initiative backed by the California Association of Realtors, which has already qualified for the ballot. The Realtors want to substitute this version, which has new provisions added to gain more support from special interests.
The Legislative Analyst’s Office has reviewed the initiative and projects that 40,000 to 60,000 families per year will pay higher property taxes under these new rules, eventually totaling as much as $2 billion in tax increases on California families.
SCA 2 MUST BE STOPPED. It is scheduled to be heard in the Senate Elections and Constitutional Amendments Committee on Tuesday (June 23). It may also be heard in the Assembly as early as Wednesday, possibly Thursday. (The identical proposal is also known as ACA 11 in the Assembly.)
CALL YOUR STATE REPRESENTATIVES. You can find their names and contact information by going online to http://findyourrep.legislature.ca.gov.
Jon Coupal is President of the Howard Jarvis Taxpayers Association – California’s largest grass-roots taxpayer organization dedicated to the protection of Proposition 13 and the advancement of taxpayers’ rights. For more information, visit www.hjta.org.