After the housing bubble burst in 2007, which precipitated the “Great Recession”, for too many Californians, the opportunity for economic success was lost. The release of Governor Jerry Brown’s proposed 2014-15 budget, which includes the first surplus in over a decade, has led some legislative leaders to believe that our economic challenges are over and that it is time to start spending again. Recent temporary tax increases and a resurgent, yet volatile, stock market have brought in more revenues than expected, causing Democratic legislators to irresponsibly call for increased long-term spending with short-term revenues.
However, most economists agree that while the United States’ economy is recovering, it is still not what it once was prior to the recession. They stress that for our economy to experience a “true recovery,” we must see a substantive drop in the unemployment rate and real employment growth.
According to the Bureau of Labor Statistics, the federal unemployment rate is currently 6.7% (8.5% in California). In December of 2007, the national unemployment rate was 4.9%. California has yet to recover from the estimated 1.4 million jobs lost during the Great Recession. Additionally, in the Legislative Analyst’s 2014-2015 California Fiscal Outlook they note that California is experiencing a longer than average economic expansion, but warns that another possible recession could occur before 2020.
Failure to resolve the state’s chronic debt now will result in increased pressure on California in the event of a future recession. While Governor Brown’s budget proposes an outlay of $11 billion to address the state’s “wall of debt,” – liabilities incurred to address previous years’ budget deficits – he continues to neglect $355 billion in escalating long-term debt, which includes $218 billion in unfunded retirement liabilities.
Additionally, this budget pays only lip-service to the $80.4 billion pension problem facing our Teachers Retirement System (CalSTRS) that is projected to go bankrupt by 2044. According to CalSTRS, its liability increases approximately $22 million each day that the state fails to act. Continued failure to resolve our long-term liabilities places great fiscal pressure on future budgets and hardworking California taxpayers.
The governor’s support of a rainy-day fund is commendable, considering he and legislative Democrats had previously resisted establishing a budget reserve to reduce budget cost pressures in low revenue years. However, California voters are already slated to vote on a more reliable rainy-day reserve in November, which was unilaterally moved by Democrats from the 2012 ballot. So while the Governor’s proposal has the appearance of saving for tough economic times, it lacks credibility.
Despite today’s modest economic growth, there was a time in California when college graduates did not have to leave the state to find economic opportunity; there was a time in California when retirees could enjoy retirement and were not forced to start a new career because of broken promises and unfunded pensions; and there was a time in California when individuals could pursue their personal economic success through hard work and determination. Lack of stable employment opportunities and suffocating debt undermines California’s once-Golden promise.
To ensure that the historic promise of California is still available to future generations we must craft a fiscally responsible budget that deals with our debts, not sometime in the future, but today.