Last Wednesday, the Commerce Department reported U.S. GDP grew at a 5.2% clip in the third quarter. The next day, Governor Newsom told a debate audience that the economy is “booming.” But Friday, California’s Legislative Analyst’s Office said that state tax revenues are falling far short of forecasts. When combined with General Fund spending that has grown more than 50 percent over the last five years, the drop in revenues portends another large budget deficit for California.
A revenue decline is a double whammy for California’s schools, which derive the lion’s share of their funding from state tax revenues but are diverting ever-increasing shares of that funding to retirement costs (eg, LAUSD is now diverting one of every six dollars, 60 percent more than a decade ago).
Deficits are bad enough on their own but doubly bad when they arise during good economic times and triply bad when caused in part by costs that don’t produce public services. The next budget will provide the governor and legislative leaders with an opportunity to address those structural issues. Let’s hope they seize it.
