ADVOCATING FOR THE INDUSTRY


Unlike the federal government, California’s Legislature and Governor are not allowed to deficit spend. However, adhering to a balanced budget requires some art as much as it does science.


California’s Budget Outlook for 2024


BY FELIPE FUENTES


C


alifornia’s size and economy are often touted as proof of concept for sound public policy by its state


leaders. Entrepreneurial spirit and solid natural resources have bestowed the state with signature industries and the world’s fifth-largest economy. California’s global presence as a leader of industry, education and culture has grown quickly ever since its gold strike origins. Interestingly, the state’s Democratic leadership is a rather new phenomenon throughout this pros- perous history.


Golden State Leadership Beginning with the 1992 election, the state’s electorate switched from mostly supporting Republicans to Democratic presidential candidates. Prior to the election of President Clinton, California was a GOP-leaning battleground state having only last voted for a Democratic presidential candidate in 1964. With this exception, California delivered for Repub- lican presidential candidates between 1952 and 1988. At the time, the state’s elected leaders were more balanced between the political parties. Today, Democrats enjoy superma- jorities in both houses of the Legislature


4


CALIFORNIA CONSTRUCTOR JANUARY/FEBRUARY 2024


with many votes to spare. Additionally, Democrats have enjoyed control over every statewide post since 2006 when the last Republican elected statewide was Insurance Commissioner Steve Poizner. For better or worse, Democrats have owned the state’s successes and chal- lenges ever since. While recessions and employment


are ignorant to partisan politics, there has been an upward trend in the sever- ity of peak unemployment rates over the past 40 years – roughly during the same time Democrats have assumed firm control over the state’s political and policy resources. Be it California’s size or its outsized presence in the technology and innovation sector, the adage that when California sneezes the rest of the country’s economy catches a cold seems to still ring true.


Deferred Tax Collections While still recovering from the short pandemic-induced recession, California was struck with winter natural disasters at the beginning of 2023. Fifty-five of the 58 counties were affected by these storms and as a result several extensions were made to state and federal tax collections.


With the extensions made until No- vember 16, 2023, the state Legislature and Governor largely balanced and passed a budget predicated on deferred tax collections in July of 2023. Coupled with persistently high inflation, the economic forecast for the state and country in 2024 seems far from smooth. A $310.8 billion dollar state budget was passed in 2023 that solved a $31.7 billion dollar deficit largely by deferring and delaying large state expenditures; mostly in transportation. Soon after the budget was signed, the Governor’s Department of Finance released a multi-year budget forecast indicating that the remainder of the Governor’s second term will likely see stagnant economic conditions and as a result will see flat tax revenues. With no growth in revenues the state


will certainly experience operating deficits notwithstanding any other compounding economic effects. Tax collections in the fall of 2023 were significantly less that projected for in the 2023-24 state budget. While the November 2023 collections are still being tallied, the state was $19 billion dollars behind in anticipated collections by the end of October 2023. Unlike the federal government, Cal-


Page 1  |  Page 2  |  Page 3  |  Page 4  |  Page 5  |  Page 6  |  Page 7  |  Page 8  |  Page 9  |  Page 10  |  Page 11  |  Page 12  |  Page 13  |  Page 14  |  Page 15  |  Page 16  |  Page 17  |  Page 18  |  Page 19  |  Page 20  |  Page 21  |  Page 22  |  Page 23  |  Page 24  |  Page 25  |  Page 26  |  Page 27  |  Page 28