California readys for the recessionb

CalWatch: In Gov. Jerry Brown’s State of the State Address last week, he noted that California’s budget has repeatedly failed to prepare for recession, resulting in “painful and unplanned-for cuts” to schools, child care, courts, social services and other programs. He added, “I don’t want to make those mistakes again.”

But the governor’s proposed $170.7 billion budget ($122.6 billion general fund) for the 2016-17 fiscal year would lead to repeating that mistake when the next recession hits.

Revenues will plunge $55 billion over three years if an average recession hits next year according to the budget summary. That would result in a $29 billion budget deficit in 2020 based on Brown’s current spending proposal, which includes $4 billion in one-time expenditures. If the Legislature instead spends that $4 billion on new or ongoing programs, the deficit would balloon to $43 billion – larger than occurred during the Great Recession.

Recession Expected

California is in the seventh year of economic expansion. That makes it two years overdue for a recession, which has occurred every five years on average, according to Keely Bosler, chief deputy director of the California Department of Finance.

“While there is significant uncertainty in forecasts, there is one thing that is quite certain: and that is history,” Bosler told the Senate Budget and Fiscal Review Committee Jan. 19. “It’s this boom-and-bust cycle that this budget really aims to avoid going forward.” But she acknowledged that “the budget in the state of California does remain precariously balanced over the long term.”

Her cautionary words were echoed by committee Vice Chairman Sen. Jim Nielsen, R-Tehama.

“We must keep in mind that though times are a little bit better, some parts of our economy have not improved,” he said. “And therefore we must exercise constraint and not get overly ambitious. And that will be what governs our progress in the budget. Let’s not get overly ambitious, and let’s not let government get out of control.”